KKR to buy 100% stake in SK E&S' Busan City Gas for $561 mn

Private equity giant KKR & Co. is slated to buy a 100% stake in Busan City Gas Co., wholly owned by South Korean energy company SK E&S Co., for 725 billion won ($560.9 million), according to investment banking sources on Dec. 20.

During its board meeting on Tuesday, SK E&S agreed to sell the redeemable convertible preference shares (RCPS) to KKR. The shares can be redeemed for cash, swapped with Busan City Gas’s assets or converted into common shares at 30-year maturity. SK E&S and KKR will sign the deal on Dec. 22, led by Bank of America Securities Inc.

SK E&S, SK Inc.'s energy unit, held a 67.32% stake in Busan City Gas as of mid-September 2021. The energy company completed the purchase of the remaining 32.68% in mid-October of the same year and immediately delisted the gas subsidiary.  

By divesting Busan City Gas, SK E&S is believed to have secured ample cash and can apply more focus on green businesses.

On Dec. 19, SK’s energy unit decided to sell Busan City Gas’ property for 632.8 billion won to a consortium consisting of Daewoo Engineering & Construction Co., NH Investment & Securities Co., Samsung Securities Co., SK Securities Co. and a local investment firm.

The property includes Busan City Gas headquarters, spanning 5,867 square meters, and a 30,606 square meter site that's home to a big-box store and family restaurants.

SK E&S plans to use the proceeds for additional M&As and facilities investments, to accelerate its transition to an eco-friendly energy solutions provider, aiming to be valued at 35 trillion won by 2035. It is boosting hydrogen, renewables, energy solutions and liquified natural gas businesses while downsizing its assets in city gas. 

SK E&S and KKR have been negotiating the deal since the second half of this year after a significant transaction of shares. The New York-based PE giant purchased 2.4 trillion won worth of SK E&S’ RCPS via its Asia Pacific Infrastructure Fund in October 2021.

KKR Managing Director Keith Kim, based in the Seoul office, led the Busan City Gas deal. He has led major infrastructure deals including the purchase of preferred shares in SK E&S last year, the buyout of local waste treatment company Eco Green Holdings for 875 billion won in August 2020 and the acquisition of 440.8 billion won of shares in sewage treatment firm TSK Corp. in October 2020.

Write to Chae-Yeon Kim and Jun-Ho Cha at why29@hankyung.com
Jihyun Kim edited this article.