EQT Partners to invest $1.4 bn in Korea's No. 2 physical security firm

Sweden’s EQT Partners AB is set to acquire a 36.87% stake in South Korean security services provider SK Shieldus Co. from a consortium led by Macquarie Korea Asset Management. EQT Partners also plans to acquire the security firm’s to-be-issued new shares, according to sources familiar with the matter on Nov. 2.

If clinched, the deal will be EQT Partners’ first transaction in Korea since launching its Seoul office in January.  

EQT Partners, under the umbrella of Europe’s powerful Wallenberg family dynasty, is slated to invest more than 2 trillion won ($1.4 billion) in SK Shieldus, which is valued in the mid-to-high 4 trillion won range. JP Morgan Chase & Co. will serve as the deal’s lead manager.

Separately, EQT Partners is in talks to acquire some SK Shieldus equities from Korean investment manager SK Square Co., EQT's largest shareholder with a 63.13% stake. There is the potential for EQT Partners to become SK Shieldus’ largest shareholder, The Korea Economic Daily has learned.

FOCUSING ON KOREAN SECURITY MARKET GROWTH

SK Group’s telecom arm SK Telecom Co. and the Macquarie-led consortium jointly acquired security services firm ADT Caps from the Carlyle Group for 2.97 trillion won in 2018.

Afterward, ADT Caps was merged with the telecom firm's affiliates NSOK and SK Infosec to advance its security technologies based around artificial intelligence (AI) and the Internet of Things (IoT). The merged entity was rebranded as SK Shieldus in October 2021.

As SK Telecom spun off its investment unit as SK Square in 2021, SK Shieldus became SK Square’s subsidiary. The security services firm holds more than 30% of Korea's physical-security market, after Samsung Group affiliate S-1 Corp., which commands half the market.    

SK Shieldus’ earnings have improved steadily since the acquisition. It posted 613.5 billion won in revenue and 95.9 billion won in operating profits in 2018, which leaped to 1.5 trillion won and 121.8 billion won, respectively, in 2021. Earnings before interest, taxes, depreciation and amortization (EBITDA) hit a record-high 381.6 billion won last year.

SK Square aimed for SK Shieldus’ IPO early this year, pledging an exit for the security firm’s financial investors, who injected 574 billion won into the 2018 deal. But SK Shieldus scrapped its IPO plan in May due to tepid investor interest in bookbuilding and a chilled market sentiment.

EQT Partners has suggested negotiations for the deal, focusing on SK Shieldus’ stable revenue stream and the growth potential of the Korean security services market. The Swedish investment firm reportedly considered investing in SK Shieldus’ pre-IPO at the end of 2021, but dropped the plan.

 

AIMS TO GROW INTO ASIA'S LEADING SECURITY SERVICES FIRM

EQT Partners’ assets under management increased by €90 billion as of end-October when it bought Baring Private Equity Asia in mid-October.

In 2008, EQT bought Sweden’s leading security services firm Securitas Direct with management rights but divested itself of the acquisition three years later. Based on that experience, EQT Partners is poised to jumpstart SK Shieldus’ growth as Asia’s leading security services firm.

On a visit to Korea in December 2021, EQT Partners Founder and Chairman Conni Jonsson met with SK Group Chairman Chey Tae-won for discussions on the Korean conglomerate’s environmental, social and governance (ESG) management strategies, hinting at collaboration between the two firms.

In an interview with The Korea Economic Daily in the same month, Jonsson described services, fiber and information technology as attractive sectors in the Korean market. 

SK Square is forecast to record profits by selling shares in SK Shieldus, as well as in Korean biotech firm NanoEntek Inc. from which it divested itself of a 28.4% stake for 58 billion won in July. 

Write to Jun-Ho Cha at chacha@hankyung.com
Jihyun Kim edited this article.