Saudi Arabia’s Public Investment Fund (PIF) is set to invest more than 1 trillion won in SK On, a battery-producing subsidiary of SK Innovation.
SK Looking to attract pre-IPO investment. The PIF, along with a number of global private equity fund (PEF) operators such as Carlyle and KKR, have submitted a Letter of Intent (LOI) to JP Morgan and Deutche Securities, who are managing the pre-placement. -IPO. The ninth-largest sovereign wealth fund in the world with operating assets of $430 billion (about 515 trillion won), the PIF hopes to invest at least 1 trillion won in SK On.
SK Group plans to raise about 3 trillion to 4 trillion won from the pre-IPO placement and invest the funds in setting up a global battery production system. Investors will receive new shares and obtain an approximate 10% stake in SK On.
SK Innovation said it has no IPO plans for SK On at this time. This puts private equity funds at a disadvantage, as they must recoup their investments within four to five years through an IPO. High-ranking SK Group chairman Chey Tae-won is negative about offering investors a put option, which gives them the right to sell back their SK On shares when the company fails to realize an IPO within a specified time frame.
SK On plans to expand its electric vehicle battery production facilities in the United States and Europe. As such, it continuously needs huge investment funds. But SK Group has made it clear that it won’t have an IPO for a considerable period of time. This makes sovereign wealth funds, rather than private equity funds, a more attractive investor for SK On.
SK On plans to invest the investment funds in the construction and expansion of battery factories in the United States. Its request for investment funds reaches 30 trillion won as it plans to build battery factories in Yancheng in China and Komarom in Hungary in the future.
PIF acquired a 38% stake in POSCO E&C from 2015 to 2016 for a total of 1,239.1 billion won and has held it until now.
