H&Q, Aeneas PE put online retailer 11Street on the market

H&Q Korea Partners and Hong Kong-based Aeneas Private Equity have put South Korea’s e-commerce platform 11Street Co. up for sale to recoup their 500 billion won ($380 million) investment, according to people with knowledge of the matter on Monday. 

The move came after its largest shareholder SK Square Co. failed to fulfill its pledge to buy back shares in 11Street from the two financial investors and gave up its management rights to the unit in November of last year.

Accordingly, the two PE houses have taken control of 11Street and SK Square is forced to join them in selling the platform as per the contractual drag-along rights.

SK Square holds an 80.26% stake in 11Street.

H&Q and Aeneas PE own a combined 18.18% stake in the online marketplace. In 2018, SK Square agreed to buy back their shares to guarantee their exit, if 11Street failed to go public by September 2023.

LOWERED ASKING PRICE

They hope to sell 11Street in its entirety for around 600 billion won, less than one-fourth of its 2.75 trillion won value in 2018 when they invested in the company.

The proposed 600 billion won represents their investment principal and interest guaranteed by SK Square.

The asking price is far lower than Qoo10 Pte.’s bid price of 1 trillion won and its book value of 1.3 trillion won.

The Singapore-based online retailer had been in the final stages of talks to buy 11Street last year, but the talks broke down due to their disagreement over financial terms.

Now that the proposed price is sharply lowered, speculation is growing that its previous bidders Amazon.com, Alibaba and Qoo10 might return to the negotiating table.

The proceeds from the prospective sale will first go into the financial investors’ coffers. Unless there is any left over, SK Square may have to write off its stake in the unit, with a book value of 1.05 trillion won.

Its sale managers Citigroup Global Markets and Samjong KPMG are tapping a few strategic investors for 11Street, the sources said.

If H&Q Korea and Aeneas PE succeed in selling 11Street, it will mark the first divestment of a Korean company through drag-along rights.

NATIONAL PENSION SERVICE

The 500 billion won investment in 11Street in 2018 was funded by the National Pension Service (450 billion won) and the Korean Federation of Community Credit Cooperatives (50 billion won).

If the online shopping mall is sold at the proposed 600 billion won, the two limited partners will recoup the principal of their investment. Their asset managers – H&Q Korea and Aeneas PE – might even manage to pocket some fees.

11Street racked up 91.0 billion won in operating losses in the January-September period of last year, against sales of 601.9 billion won.

(This article was corrected on Jan. 12. SK Square had agreed to exercise its call option for 11Street shares held by H&Q and Aeneas PE in case 11Street failed to go public by September 2023) 

Write to Ji-Eun Ha at hazzys@hankyung.com
 

Yeonhee Kim edited this article.