Talks with Global Investors Make Little Progress
SK ON, an electric vehicle battery subsidiary of SK Innovation, has decided to receive up to 2 trillion won in investment from a consortium of domestic investors led by EastBridge Partners, an independent private equity firm.
Initially, the company sought to attract investment from global private equity funds such as Carlyle, but as negotiations faltered, it turned its eyes to Korean investors.
SK On signed an MOU with the EastBridge Partners consortium to attract investment on Aug. 18. Up to 2 trillion won will be invested in the company, whose value is estimated to be above 20 trillion won. If the investment deal is successfully sealed, the consortium is expected to acquire a stake of about 10 percent in the company. The consortium consists of EastBridge, Korea Investment Private Equity, and Stellar Investment.
SK On has been pushing to attract 4 trillion won in investment to expand overseas battery plants. Of the total, it sought to attract about 3 trillion won from foreign financial investors (FIs) so it had been in talks with Carlyle, BlackRock, KKR and the Government of Singapore Investment Corp. (GIC). It planned to receive the remaining 1 trillion won from domestic investors. However, KKR and GIC left the negotiation table and talks with Carlyle and BlackRock faltered, forcing the company to receive investment from domestic investors.
SK On softened investment conditions, too. At the beginning of this year, the company estimated its value at 35 trillion won. It also stuck to common stocks with no investor protection clauses. However, its value fell by more than 10 trillion won, and there is a high possibility of the company issuing convertible preferred stocks instead of common stocks. It also scaled up investment from Korean consortiums to 2 trillion won from 1 trillion won.
Foreign investors showed a big interest in investing in SK On until the beginning of this year, but their attitude changed following sudden changes in the market environment. In February, the war between Russia and Ukraine broke out, causing raw material prices to soar. As interest rates rose amid rising inflation, global investors’ expected return also ascended.
SK On initially planned to wrap up investment attraction in the first half of this year. But as the plan was delayed, the company has been financing investment and operations through loans. In May, it borrowed about 1 trillion won from a large Korean brokerage firm. Last month, it raised a total of US$2 billion for investment through Euler Hermes, a German trade insurance agency, Korea Trade Insurance Corp., and the Export-Import Bank of Korea.
SK On is brooding over financing investment with funds from its parent company SK Innovation if investment attraction from global investors fails.