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[Alpha Biz=(Chicago) Reporter Paul Lee] SK Square is on the verge of losing its subsidiary 11th Street.
The move comes as negotiations with Singapore's e-commerce company Q10 recently broke down. If SK Square fails to find a new investor or gives up its call option (right to buy shares), financial investors (FI) will be able to forcibly sell its stake in 11th Street owned by SK Square.
FIs are keen on the direction of the 11th Street deal. In addition to 11th Street, SK Group has attracted similar investments from a number of affiliates. If SK fails to reach a compromise with FI, there are concerns that the controversy over "good faith" could spread in the capital market as public funds such as the National Pension Service have been invested on a large scale.
According to related industries on the 27th, SK Square is expected to make a decision as early as next week during discussions on the 11th Street call option event. The deadline for SK Square to exercise its call option is imminent in early December.
SK Square is running out of time because it has not been able to reach a consensus in the recent stake acquisition negotiations with Q10. SK Square has been negotiating with the FI Nile Holdings Consortium for a stake of 18.18% since September. SK Square and Q10 have failed to narrow their differences over the share exchange rate during negotiations.
In 2018, 11th Street received a total of 500 billion won from the Nile Holdings Consortium, which consists of the National Pension Service, Saemaul Finance Firm, and H & Q Korea, a private equity fund (PEF) operator. 350 billion won from the National Pension Service, 100 billion won from the H & Q Blind Fund, and 50 billion won from the Saemaul Finance Firm were invested. The fund's anchor investor (Anchor LP) has invested a large amount of public funds into the national pension fund.
Nile Holdings made a condition (September 30, 2023) for an initial public offering (IPO) within five years at the time of its investment in 11th Street. However, due to the recent contraction of the capital market, the IPO drive failed to meet the deadline this year, following last year.
Although the deal negotiations with Q10 seemed to emerge as the next best option for IPO, SK Group's plan to repay the FI investment has returned to square one. Now, the options given to the remaining SK group have been narrowed down to two.
At the time of attracting investment, SK signed a contract with FIs to include a Drag & call clause while issuing a repayment convertible preferred stock (RCPS) worth 500 billion won. If SK Square exercises its call option, it will return the principal of 500 billion won with an annual interest rate of 3.5 to 8 percent per year and hold a 100 percent stake. Or, under the clause of the right to demand joint sales (dragalong), the company must hand over the right to sell management rights to FI, including its stake (80.26%) held by SK Square.
AlphaBIZ 김지선(stockmk2020@alphabiz.co.kr)
