SK Group and private equity firm Premier Partners are expected to sign a shareholders’ agreement soon to raise funds for SK IE Technology (SK IET), a battery component subsidiary wholly owned by SK Innovation.
SK Innovation held a board meeting on September 23 to approve the PE firm’s purchase of new shares issued by SK IET, industry sources said on September 24. The PE firm will acquire 10% of the company for 300 billion won ($257 million).
Premier Partners will sign a joint venture agreement with SK IET and a shareholders’ agreement with SK Innovation – which owns 100% of SK IET – at the same time.
A key point to the contract addresses how the South Korean conglomerate will guarantee the financial investor’s exit. The two firms have reportedly agreed to sign the deal with a commitment to list SK IET’s shares on the stock market within five years. SK IET has already hired bookrunners to lead its planned initial public offering (IPO).
Premier Partners included a call option in the agreement for SK Innovation to purchase shares of SK IET at an annual interest rate of 4.5%, in case SK IET’s planned IPO doesn’t go as expected. If the shares are listed, the rate will be lowered sharply to a 2% level. The PE firm also has rights to sell a 100% stake in the company to a third party if SK Innovation doesn’t exercise its call option.
The two firms have reportedly reached an agreement on major terms and conditions and are expected to sign the contract before the Chuseok holiday, the Korean Thanksgiving, which runs from September 30 to October 2. The deal is expected to close on October 6.
SK IET was founded last year after it was split off from SK Innovation, the energy and chemical unit of South Korean conglomerate SK Group. The company produces lithium-ion battery separators, one of the key components in lithium ion batteries used for smartphones and electric cars, and flexible cover windows used in the manufacturing of flexible displays. (Reporting by Hye-ran Kim)