Security services firm KT Telecop will raise 150 billion won ($135 million) from outside investors to increase its capital base through sale manager Samjong KPMG, sources said, with investors likely to have a stake of about 20% if it is converted.

The company has received offers from a range of strategic and financial investors and has entered into detailed negotiations with some potential buyers. The deal is being carried out through a competitive limited bidding, but there is no specific bidding schedule and proposals are being received individually.

KT Telecop is seeking an investor which could become its second largest stakeholder and create synergies with parent KT. The move was widely expected, as the firm has a stake of only about 10% in the security services industry, and its operating margin was 1.5% at the end of 2019, lower than for rivals S-1 (9%) and ADT Caps (16.7%).

S-1 is the largest security platform provider with a 50% share, and ADT Caps has 30%. KT Telecop has doubled its efforts to catch up by creating synergies with its parent mobile carrier to provide more advanced IT services like cloud-based video security.

However, market insiders said the company has to consider a wider range of options to boost its enterprise value, including a change in management. Some said KT Telecop’s fundraising is comparable with that of its previous rounds.

In 2011, KB Kookmin Bank acquired convertible bonds worth 15 billion won from KT Telecop, and KB Asset Management purchased redeemable convertible preference shares worth 35 billion won. Four years later, KT Telecop issued convertible preferred stocks and used the proceeds to repay financial investors. KT bought back more than 490,000 preferred stocks from Hana Financial Investment for about 118 billion won in November 2019.

KT Telecop wants an equity value of around 750 billion won and an enterprise value of 840 billion won, given its net borrowing of September 2020. A consortium of SK Telecom and Macquarie acquired a 100% stake in ADT Caps for 2.97 trillion won in 2018, which is about 3.51 times higher than KT Telecop’s value.

However, some market insiders said KT Telecop’s targeted value is a bit high as the deal doesn’t include its management rights. (Reporting by Ar-rum Rho)