Sovereign Asset Management said yesterday it has sold off its entire stake in SK Corp, South Korea's largest oil refiner, after an unsuccessful two-year attempt to oust management at the firm.
The sale followed a decision by the refiner's board to retain its "discredited leadership and poor governance practices," Mark Stoleson, head of Group Investments at the Dubai-based fund, said in a statement.
"Having exhausted all of the legal rights currently available to shareholders under Korean law, Sovereign is now exercising the only meaningful right remaining open to us -- withdrawal from our investment in SK Corp," he said.
"Without confidence that a company's management is both competent and ethical, investors can have no reasonable assurance that their capital will be correctly utilized," he said.
Sovereign is estimated to have earned a more than 800 billion won (US$770 million) profit from the sale of its 14.8 percent stake in SK Corp.
It sold 19 million shares to foreign investors including funds based in Hong Kong and England, for about 49,000 won a share, Yonhap news agency said.
SK Corp shares fell 4.73 percent to close at 50,200 won yesterday but analysts said the fall had largely been factored into the market.
"This fall can't be called a panic. The sale has been long expected and thus largely priced into the current stock price level," Goodmorning Shinhan Securities' Sean Hwang said.
Hwang, however, warned the timing of the sale may have some significance to other shareholders.
"Sovereign may have concluded that the oil refinery industry is at a peak and thus decided to sell out. This sort of thinking may affect other investors," he added.
Sovereign had been the refiner's largest foreign shareholder since it started collecting shares in SK Corp, the flagship company of South Korea's third largest conglomerate, in April 2003.
It then became the center of a debate about the role of foreign investors in South Korean companies and corporate governance in general.
Economic nationalism grew after Sovereign launched a drive to oust SK Corp chairman Chey Tae-Won.
Chey's control of the lucrative refiner was challenged since he was sentenced in 2003 to three years in prison for irregular business practices.
But SK Corp shareholders retained the 44-year-old business tycoon as a board member in March. An appeals court suspended Chey's prison term last month, effectively freeing him.
SK Corp accused Sovereign of failing to fulfill its commitment to be a long-term investor.
"This equity divestment proves Sovereign was not the kind of investor that it has long claimed to be but rather a short-term investor focusing on profits," SK Corp's corporate relations head Whang Kyu-Ho said.
Stoleson, however, denounced the refiner for failing to implement internationally recognized standards of corporate governance.
"Without increased transparency, or real management accountability, it is hardly surprising that investors remain sceptical of SK Corp's claims of reform," he said.
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