SK eyes $1 bn gains from Chinese copper foil firm exit

SK Inc. has embarked on the process to sell its 30% stake in Londian Wason Energy Tech, the owner of the world’s largest copper foil maker, in a deal expected to generate around 1 trillion won ($760 million) in capital gains, according to people familiar with the matter on Thursday.

SK is the second-largest shareholder in Londian Wason, after it invested a total of 380 billion won into the special purpose company between 2019 and 2020 to secure a 30% stake. China’s D&R Group is the largest shareholder.

It recently sent the prospectus of Londian Wason, which owns 100% of China-based Wason Copper Foil, to multiple global private equity firms. SK aims to close the sale by the end of this year.

Wason’s corporate value is estimated at mid-4 trillion to 5 trillion won, based on which SK’s stake is now worth about 1.5 trillion won, about three times its investment.

The stake is being put up for sale as Londian Wason is preparing to list either in Hong Kong or New York next year.

In this regard, SK's 30% stake in the copper foil maker up for grabs could be an attractive pre-IPO investment, the sources said. 

Since SK made its first investment in Wason in 2019, its revenue has been growing by an average of 50% or above a year.

In 2022, Wason posted an earnings before interest, tax, depreciation and amortization of 261 billion won against sales of 1.47 trillion won.

Copper foil is a film formed by thinly spreading copper. It is a key material of anodes, one of four ingredients in rechargeable batteries and acts as a passage for electrons.

The industry has high entry barriers because of the heavy investment required in the initial business stages.

The divestment is expected to mark SK’s first successful exit after it transformed into an investment and holding company of SK Group.

The country's No. 2 conglomerate has been streamlining its investment portfolios to enhance its financial health and raise funding for new growth drivers such as AI, biotech and semiconductors.

The stake sale is expected to reduce SK Inc.’s net borrowings from 10 trillion won on a standalone basis as of the end of June.

It will also mitigate market concerns about the group’s overseas investments, some of which it has struggled to cash out of due to the subdued IPO market and rising interest rates.

“If the transaction is completed, it will not only create a return of nearly three times the principal, but also will dispel market concerns about SK Group's expansionary moves," one of the sources told Market Insight, the capital market news outlet of The Korea Economic Daily.

Some of the proceeds will be diverted into the group’s semiconductor and battery material businesses to meet demand from electric vehicle manufacturers.

Meanwhile, SK Nexilis Co. under the SK Group is the world’s largest copper foil producer.

The rise in SK Nexilis' market share was also attributed to the group's decision to divest of its stake in the Chinese rival copper foil company.

Write to Jun-Ho Cha at chacha@hankyung.com
 

Yeonhee Kim edited this article.