Battery maker SK On sweetens $1.4 bn fundraising deal

SK On Co., the world’s fifth-largest rechargeable battery maker, has sweetened its deal to attract 2 trillion won ($1.4 billion) in new share issues, which had been stalled amid controversy over its valuation and the sluggish stock market.

The unit of SK Innovation Co. bumped up the guaranteed return for the new shares to 7.5% per year from the previous 5.5% to reflect rising interest rates, according to people familiar with the matter on Wednesday.

Additionally, it pledged to bring forward its IPO schedule to 2026 or earlier than the initially planned 2027.

To revive the drawn-out deal, SK On adjusted its valuation target lower to 22 trillion won from the previous estimation of about 32 trillion won.

The new target was even below the 24 trillion won at which it had received an undisclosed amount of investment from Swedish battery maker NorthVolt in July.

The fundraising will be split evenly between domestic and overseas funds.

From Korean investors, it will raise 1 trillion won from a consortium of private equity firm EastBridge Partners, Korea Investment Private Equity and Stella Investment.

The three-way consortium has already secured 500 billion won from Korea Investment PE’s parent group Korea Investment Holdings. This week, it pitched the investment to other Korean financial services companies and pension funds to raise another 500 billion won by the end of November.

Overseas investors will be tapped to raise another 1 trillion won. Hong Kong-based Anchor Private Equity and Qatar Investment Authority (QIA) are among the potential investors.

North Asia-focused MBK Partners is considering investing in SK On through its special situations fund, the sources said.

Its fundraising plan had lured global investment firms betting on the growing electric vehicle market. Early this year, SK had narrowed bidders to BlackRock, The Carlyle Group, KKR & Co. and Singapore’s GIC.

The company had planned to raise up to 4 trillion won from them.

But the plan hit a snag due to a surge in raw material prices and subdued investor sentiment, coupled with its consecutive years of losses and no clear IPO timetable.

Accordingly, some of the four shortlisted bidders stepped back and reassessed SK On’s valuation.

On an upbeat note, the US Inflation Reduction Act, signed into law last month, is expected to rekindle interest in SK On, which has been scaling up its US investments.

The bill includes a $7,500 tax credit for EVs, which must source at least half of their battery components in the US or its free trade partners. The proportion will increase to 40% by 2023 and 80% by 2027.

SK On plans to allocate the new funding to its US-based facilities to expand capacity, in addition to about 700 billion won it had already pumped into its US production lines during the first half of this year.

If the company needs additional funding in the future, it will raise money through its parent SK Innovation.

Sweden-based NorthVolt began its battery production at the end of last year. Its order backlog is about $50 billion, less than one-third SK’s $160 billion.

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