South Korea’s telecommunications market leader KT Corporation is mulling whether to sell its security unit KT Telecop or raise funds externally for the unit amid strong interest from potential investors.
A number of investors have approached KT seeking investment in KT Telecop, according to industry sources on July 30, and KT is weighing the possible sale. Negotiations have not begun, although potential investors are pitching different investment structures and KT is reportedly reviewing proposals without advisors.
According to sources familiar with the situation, a domestic financial investor has signed a non-disclosure agreement and started exploring KT Telecop. Separately, a strategic investor is discussing investment in KT Telecop with its advisors although talks are still at an early stage due to different views on valuation and deal structure.
KT Telecop has raised external funds several times from financial firms, including KB Kookmin Bank and Hana Financial Investment by issuing convertible bonds and redeemable convertible preference shares. This time, however, KT Telecop may sell its old shares.
KT Telecop was spun off from South Korean public telephone maintenance and repair service provider KT Linkus in 2006 and is now the third-largest security service company in the country with a market share of 10% behind S-1 (50%) and ADT Caps (30%).
Domestic security services firms are in fierce competition to acquire peer companies for potential synergies. ADT Caps recently acquired a security services business of SK Hystec after the security service provider was acquired by a consortium of SK Telecom and financial investors.
KT is likely to give a potential investor exclusive negotiation rights for further negotiation. The company has received investment proposals since last year.
A KT official said that the company is not reviewing the sale of its stake in KT Telecop. (Reporting by Ar-rum Rho)