KKR, Carlyle, TPG vying for $4 bn stake in SK's battery arm

KKR & Co., The Carlyle Group and TPG Inc. have handed in preliminary bids for shares in SK Group's battery unit SK On, which is seeking to raise between 3 trillion and 5 trillion won ($2.5 billion-$4.2 billion) in a pre-IPO share sale, according to people with knowledge of the matter on Monday.

SK On, spun off from SK Innovation Co. in October 2021, invited global private equity firms to a preliminary round of its stake sale late last year, aimed at funding its massive overseas facility expansion.

The company, with an equity capital of 2 trillion won, may select two to three investors for the pre-IPO transaction, given the sheer size of the deal, according to the people.

Deutsche Bank and JPMorgan are handling the transaction, for which no further details were immediately available.

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

The new funding is poised to become the largest-ever fundraising for a unit of the SK Group, which is now building new battery plants in the US, Hungary and China to supply to electric vehicle makers.

Market speculation is that the battery arm might go public within the next five years. But SK Innovation Chief Financial Officer Kim Yang-seob said during an earnings conference call last month that the company was not currently considering an initial public offering of its fully-owned battery subsidiary at all.

The absence of an IPO timetable could dampen investor interest in the pre-IPO deal, said an investment banking source.

"Given the sheer size of the stake sale, SK may need to come up with exit options for investors to drum up interest," he told The Korea Economic Daily's capital market news outlet Market Insight. 

INVESTMENT PLANS

As a latecomer to the EV battery market, SK On has been aggressive in catching up with rivals. It plans to more than double its production capacity from the current 40 gigawatt-hours (GWh) to 85 GWh by 2023 and to expand it over tenfold to 500 GWh by 2030. 

To that end, SK On and Ford Co. announced in September 2021 that they would invest a combined $11.4 billion in the US to build an assembly and battery plant in Tennessee, and two other battery factories in Kentucky. 

Separately, SK On is building its second battery plant in the US state of Georgia and preparing to build a third plant in Hungary; and a fourth one in China.

The fundraising follows LG Energy Solution Ltd.' successful market debut on Kospi last month. The world's second-largest battery maker now ranks as the second-largest stock on the country's main bourse with a market value of 126 trillion won.

By comparison, Samsung SDI has a market capitalization of 38.3 trillion won as of Tuesday's share price. 

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