SK Square will sell its e-commerce affiliate 11Street to SK Planet. Financial investors (FIs) including the National Pension Service are expected to recover all of their investment. As a result, the dispute between SK Group and investors, sparked in 2023 by the decision not to exercise a call option, has moved toward a conclusion after two years.
According to the investment banking (IB) industry on the 29th, SK Square held a board meeting that day and gave final approval to a plan to sell 100% of its 11Street equity to SK Planet. Once the transaction is completed, 11Street will move from a subsidiary to a grandchild company of SK Planet.
With this sale, investors in 11Street—including private equity fund (PEF) manager H&Q Korea and investors in a blind fund such as the National Pension Service and the Korean Federation of Community Credit Cooperatives (KFCC)—are expected to recover their principal in full. Including dividends paid over time, they are likely to receive more than their principal.
In 2018, the Nine Holdings consortium (H&Q Korea, National Pension Service, and the Korean Federation of Community Credit Cooperatives (KFCC)) invested about 500 billion won in 11Street. Of that, the National Pension Service's investment was about 400 billion won, the largest portion. At the time, the Nine Holdings consortium established a capital recovery mechanism through a shareholders' agreement with SK Square. If 11Street failed to go public (IPO) within five years, SK Square would exercise a call option to buy back the FI equity at an agreed return; if it declined to do so, the FI could sell its equity, including SK Square's equity, to a third party.
Subsequently, SK Group gave up exercising the call option on the FI equity in 2023, two years ago. It said exercising the call option to buy back the equity at the agreed return, even as 11Street's corporate value had fallen, could raise allegations of breach of duty. The FI ultimately sought to sell control through a drag-along right, but the slump in the e-commerce market made the process difficult.
As the time to exercise the call option came around again this year, SK Square chose a plan to repay the investment. It is known that strong pressure within SK Group to prevent losses at the National Pension Service played a decisive role. If relations with a major limited partner sour, the group could face problems raising funds for new investments during its ongoing rebalancing process.