Valuation of a Holding Company: The Case of SK C&C IPO

We examine the IPO of SK C&C. Facing the recent regulation change to improve corporate governance structure, Korean conglomerates resolve the issue of cross-holdings across affiliated companies. The establishment of a holding company and the IPO of SK C&C streamline the ownership structure of SK group. Our analysis shows that the issue price of SK C&C is set at substantial discount. Given that the priority of SK group was to improve corporate governance structure, it appears that managers of SK C&C are less interested in selling their shares at the highest possible price. The IPO of SK C&C achieved the intended goal of dismantling cross-holdings and streamlining ownership structure of SK group. This drives higher market valuation for shareholders of SK C&C and affiliated companies in SK group as well.