Will 11 Street Turn from an Ugly Duckling into a Swan?

If 11 Street succeeds in attracting 500 billion won in equity investment this time, it will be the achievement in three years since it started searching for an investor.

Earlier, 11 Street negotiated with a Chinese private investment company in 2016, for an investment of 1.3 trillion won but it was not finalized due to the THAAD controversy. Last year, there was a talk to spin 11 Street off SK Planet and sell 50% of its stake to Lotte or Shinsegae but the plan was stranded because they could not narrow the gap between themselves over management rights.

If there is a difference in the ongoing negotiation compared to previous ones, it is that the discussions are being made on condition that the management rights are not passed. This change was influenced by the group's recognition of 11 Street, which has been a loss-maker. Originally SK Telecom was going to sell off 11 Street, but it was reported that Choi Tae-won, chairman of the SK Group, chose to attract equity investment as he was deeply impressed by US e-commerce company Amazon, which has expanded its territory from online to offline.

The meeting of Park Jung-ho, CEO of SK Telecom and Marwin, chairman of Alibaba also played a part.

An SK planet official said, "Last year CEO Park met with chairman Mawin and said, 'I thought Alibaba was an e-commerce company but it was a data company.' In the era of the Fourth Industrial Revolution, data is an essential part of the ICT business but SK Telecom can only get limited data about its customers. On the other hand, 11 Street can continuously get comprehensive information on what products customers like and dislike.”

In other words, 11 Street, which was viewed as an ugly duckling of SK Group, started getting attention as a swan that would lead the Fourth Industrial Revolution, and the SK Group searched for a financial investor (FI), not a strategic investor (SI).

Some believe that with this investment, SK Planet will be able to spin off 11 Street as a separate unit. The redeemable convertible preference shares (RCPS), which SK Planet will issue on H&Q in return for its 500 billion won equity investment, is going to turn into new shares at the time of 11 Street’s IPO. Different measures are being talked about including spinning 11 Street off at the time of the investment return and conducting IPO, and spinning 11 Street off first and issuing RCPS.

An industry observer said, "It was predicted that SK Telecom would establish a holding company and 11 Street would be spun off SK Planet in the second half of the year." If investment and SK Telecom's corporate restructuring are done at the same time, 11 Street will have a greater IT capacity and have a bigger impact on the domestic distribution industry. "