SK Ecoplant raises over $800 mn from Korean PE firms

South Korea's SK Ecoplant Co. has raised a total of 1 trillion won ($830 million) from four domestic private equity firms, including 390 billion won ($323 million) from IMM Investment Corp., according to people with knowledge of the situation on Sunday.

The fundraising followed its $1 billion purchase of Singapore-based electronic waste disposal firm TES Envirocorp Pte. Ltd. last week, the latest in a string of Ecoplant's acquisitions, which raised concerns about its financial conditions. 

To alleviate such concerns, the Korean waste management company recently agreed to sell 600 billion won ($500 million) in preferred shares convertible to its common shares to a domestic consortium of PE firms, including Premier Partners. Two other PE firms were not identified.

The investment was made on the condition of Ecoplant going public within a designated period of time, but its IPO timetable was not disclosed.

Unlike conventional preferred stock that comes without voting rights, the convertible preferred shares to be issued by Ecoplant will offer voting rights to the PE consortium, which is slated to become Ecoplant's third largest shareholder.

Currently, SK Group's holding company SK Inc. is the largest shareholder in Ecoplant with a 44.48% stake.

FINANCING OF $1 BILLION TES DEAL

TES operates 43 facilities in 21 countries, with major facilities in Singapore, China, Australia, the UK and Germany. Its revenue in 2021 reached S$465 million ($346 million).

The acquisition price of $1 billion is one-fourth of Ecoplant's total assets and 122 times its net assets, according to its regulatory filing.

Ecoplant will stump up 390 billion won in its own capital to finance the all-cash deal of TES; receive 390 billion won from IMM Investment; borrow the remaining 420 billion won from financial institutions, the sources said.

SK Group, the country's third-largest conglomerate, has been expanding its footprint in diverse fields of waste treatment and recycling and in bioenergy.

In a bid to advance into the biofuel market, SK Inc., the group's holding company, said in December last year that it would co-invest $50 million in the US-based Fulcrum BioEnergy with a domestic private equity fund.

Last week, two leading domestic rating agencies, including Moody’s Investors Service's Korean arm, voiced concerns about Ecoplant's aggressive expansionary strategy through acquisitions and their negative impact on the company's financial status.

Ecoplant's net borrowing quadrupled to 1.6 trillion won as of end-September 2021, from 400 billion won at end-2019. Debt to equity ratio spiked to 340% versus 267% over the same period.

To improve its bottom line, Ecoplant is also seeking to sell a stake in its wholly-owned subsidiary SK Ecoengineering Co., according to the sources.

Premier Partners, established in 2005, manages 1.4 trillion won in assets. Three dozen companies in its portfolio include Kakao Games Corp.; Krafton Inc., the developer of the popular battle royale game PlayerUnknown’s Battlegrounds (PUBG); and Toss, the country's largest mobile financial platform.

Write to Si-Eun Park and Kim Eun-jung at seeker@hankyung.com
Yeonhee Kim edited this article