SK On's $4 bn funding draws PE giants, GIC, Saudi PIF

BlackRock, Blackstone, Singapore's GIC and Saudi's Public Investment Fund (PIF) are among the preliminary bidders for shares worth up to $4.2 billion in South Korean battery maker SK On Co., according to people with knowledge of the matter on Wednesday.

SK On, spun off from SK Innovation Co. last October, is seeking to raise between 3 trillion and 5 trillion won ($2.5 billion-$4.2 billion) in a pre-IPO share sale to finance facility expansion.

Despite consecutive years of losses and the absence of an IPO timetable, its fundraising has drawn around 10 bidders, including other private equity giants such as KKR & Co., The Carlyle Group and TPG.

They submitted letters of intent by the Feb. 7 deadline, and their proposed investment size and valuations on SK On varied, the sources said.

Among them, GIC is understood to have expressed its intention to make up a big chunk of the funds raised, betting on the growth potential for the EV battery market.

The sovereign wealth fund's bid for SK On follows its sizeable investment last month in LG Energy Solution Ltd. during its $11 billion IPO process. The exact amount of GIC's investment in the world's No. 2 battery maker was not disclosed.

Deutsche Bank and JPMorgan, handling the transaction, will shortlist the bidders to around five next week. They will be allowed to carry out due diligence on the battery maker before making final bids.

SK On is expected to select two to three investors for the pre-IPO deal.

CUMULATIVE LOSSES

SK On has accumulated operating losses of 1.4 trillion won since 2019, despite soaring sales. Its operating loss widened to 683.1 billion won in 2021, versus the previous year's shortfall of 426.5 billion won, while sales almost doubled to 3 trillion won during the period.

SK On controls 5.6% of the EV battery market as the fifth-largest player as of 2021, according to SNE Research. Sector leader China's CATL Co. commands 32.6%, followed by LG Energy with a 20.3% stake and Panasonic Corp. with a 12.2% stake. China-based BYD Co. ranks fourth with an 8.8% market share.  

Based on SK On's estimated corporate value of 25 trillion to 30 trillion won, the stake deal will likely end up selling a combined 10 to 20% stake in the battery unit.

As a latecomer to the EV battery market, SK On plans to expand its production capacity from the current 40 gigawatt-hours (GWh) over tenfold to 500 GWh by 2030. 

But the company is unlikely to go public in the near future. Last month, SK Innovation Chief Financial Officer Kim Yang-seob said during an earnings conference call that the company was not currently considering an initial public offering of the fully owned battery subsidiary at all.

BLACKSTON'S FIRST KOREAN DEAL SINCE 2019?
 
For Blackstone, SK On could become its first investment in a Korean company since it opened a Seoul office last year. Its last buyout deal in the country was a 1.1 trillion won ($1 billion) acquisition in 2019 of Geo-Young Corp., a medical goods wholesaler.

Last year, the US investment firm's exit plan for its 300 billion won investment in Korean handbag maker Simone Acc. Collection Ltd. was thwarted after Simone dropped an IPO plan due to weak institutional demand. 

Saudi Arabia’s sovereign wealth fund PIF is raising its clout in South Korea's stock market, particularly in the gaming sector. It has built up stakes in NCSoft Corp. and the Japanese arm of Nexon Co. to become the fourth-largest shareholder in each. 

Write to Chae-Yeon Kim at why29@hankyung.com
Yeonhee Kim edited this article