Cape Investment and Securities has been named the priority bidder in the auction for a 10.04 pct stake in SK Securities Co., beating out Q Capital Partners, SK Co. said on July 25.
The company said it received bids from Cape Investment and Securities as well as Q Capital Partners, and ultimately decided upon the once-named LIG Securities, despite the fact that the private equity fund wrote in a higher bidding price.
Cape Investment and Securities is an affiliate of Cape Investment Co., a maker of ship engines, which took an 82 pct stake in LIG Securities for 130 billion won and renamed it Cape Investment and Securities earlier this year. Sources said Cape I&S has better non-price conditions, although it fell short of Q Capital’s overall bid price. SK Co. felt Cape I&S would be able to pass the evaluation of its eligibility to be a majority shareholder without any problems and would also be successful in PMI matters after the takeover, because it pledged to maintain stable job security for people at SK Securities for five years.
President Lim Tae-soon said no merger is planned of Cape I&S and SK Securities. He said SK Securities would focus mainly on its brokerage business, PEF and bond transactions, while Cape I&S will mainly take care of stock market dealings.
The auction to sell a controlling 10.04 percent stake in SK Securities Co., the brokerage unit under South Korea’s major conglomerate SK Group, drew multiple bidders, including Cape Investment & Securities Co., hinting at the success of the sale that should be completed by early August to comply with the country’s fair trade regulation that bans a holding company’s stake ownership in a financial unit.
SK Group and its financial advisor, Samjong KPMG, received preliminary bids from a number of securities firms, including Cape Investment & Securities, and private equity funds before the deadline on July 24.
Industry sources expect SK Group will ultimately seek a buyer who is willing and capable to develop the brand value of SK Securities and ensure stable job security after the sell-off. A strong candidate should also prove its financial ability to fund the buyout and pass major shareholder eligibility evaluation conducted by the country’s financial authority, a must that could help the company complete the sale without setback before the Aug. 2 deadline set by the Fair Trade Commission.
Under Korea’s fair trade law, a holding company is not allowed to own stakes in financial companies.
To abide by the law, SK Group earlier this month announced its plan to sell off a 10.04 percent stake in SK Securities held by SK C&C, the group’s information technology (IT) service unit that was merged with the group’s holding company SK Holdings Co. in 2015. The remaining 83.88 percent stake is held by minority shareholders.
Market analysts estimate that the deal value would be set below 100 billion won ($88.1 million) including management premium based on the company’s total market capitalization of about 600 billion won, or 1,880 won a share, as of July 24.
However, considering that a potential buyer would want to exert tighter control over management, the candidate may propose a rights offering to hike its stake ownership, which could raise the total buyout value to as high as 200 billion won.
Cape Investment & Securities is the unit of ship component maker Cape, which jumped into the stock brokerage business in late 2015 when Cape Investment acquired then LIG Investment & Securities.
The combination of Cape Investment & Securities and SK Securities would create 620 billion won in total equity capital, upping their combined business by 20 notches in ranking to 18th. Cape Consortium aims to issue new shares to increase its stake in SK Securities to up to 30 percent.
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