KKR is in talks with SK Engineering & Construction (SK E&C) to buy 16.7% of waste management services provider TSK Corporation, industry sources said on August 28. It is a move by the U.S. buyout giant to build up its portfolio of waste infrastructure assets in South Korea.
SK E&C recently signed a deal to buy waste company EMC Holdings from Affirma Capital for over 1 trillion won ($842 million), which is currently under regulatory review. It is seeking to divest its stake in TSK Corporation to avoid antitrust issues and KKR has showed strong interest in the company, according to sources.
KKR completed the acquisition of waste company Eco Green Holdings from Anchor Equity Partners for 875 billion won in August. Its subsequent investment in TSK Corporation could signal that the buyout firm will further invest in the country’s waste management sector, industry watchers said.
Eco Green Holdings provides both industrial and medical waste treatment services, which differentiate the company from rivals, most of which have a license to process industrial waste only. TSK Corporation is one of three dominant companies that form an oligopoly in the South Korean water treatment market, with a share of nearly 40%.
KKR might want to raise its stake in TSK Corporation to eventually merge the company with Eco Green Holdings, some industry watchers said. This could enable the combined organization to integrate water treatment, incineration, landfill and waste energy recycling into its value chain operations. But others noted that Taeyoung Engineering & Construction, TSK Corporation’s largest shareholder with a 62.61% stake, would unlikely sell its shareholding because it also has ambitions to expand in the waste management sector.
KKR has been enhancing its Asia Pacific infrastructure investment teams since last year. In South Korea it hired Keith Kim as director of infrastructure last year, who led several large infrastructure deals at Macquarie Group before joining KKR. It is also reportedly in the process of raising its first Asia-focused infrastructure fund, with $1.5 billion in commitments in a first close in November 2019. (Reporting by Hee-yeon Han)