Sanil Electric, which produces distribution transformers, committed to invest 30 billion won in a private equity fund (PEF) to secure investment revenue. The PEF was formed by SJL Partners, led by CEO Lim Seok-Jeong, who has had a long relationship with Celltrion Chairman Seo Jung-Jin.
SJL Partners has formed consortia with listed companies and closed several large mergers and acquisitions (M&A). In the industry, there is speculation that Sanil Electric, whose coffers have swelled thanks to the transformer boom, may be moving to pursue M&A.
According to the investment industry on the 14th, Sanil Electric signed a capital commitment totaling 29.5 billion won to DTS No. 1 Private Equity Investment Partnership. Given that the fund's total commitment is a little over 44.3 billion won, Sanil Electric's equity share comes to 66.52%. Sanil Electric said, "We decided to participate as a limited partner (LP) of the PEF."
Sanil Electric is moving to invest hundreds of billions of won in financial investments because profit from its core business is growing. Sanil Electric's operating profit rose from 12 billion won in 2022 to about 46 billion won in 2023, and approached 110 billion won in 2024. Last year's operating profit is estimated to have exceeded 150 billion won.
Sanil Electric, which produces transformers and reactors, exports 80% of its products, with the United States as its largest export market. As demand grows for replacing aging U.S. power grids and for renewable energy, and as global big tech companies increase investments in artificial intelligence (AI) data centers, Sanil Electric's profit has surged. Sanil Electric's profitability is also at a high level. Shinhan Investment & Securities expected last year's operating margin at Sanil Electric to reach 38%.
As profit increases, financial capacity is also expanding. Retained earnings left after paying dividends to shareholders from profit generated by operating activities rose from 30 billion won at the end of 2022 to 240 billion won as of the end of September last year. In less than two years, the coffers have swelled eightfold.
In particular, the industry is watching SJL Partners' past moves. Considering that SJL Partners has a track record of closing large deals by teaming up with strategic investors (SI), there is growing weight behind the view that Sanil Electric's latest commitment goes beyond a simple "financial investment" and serves as an advance step toward strategic M&A.
Some voice concern that 29.5 billion won is being put into a highly volatile private equity investment rather than strengthening core competitiveness or returning cash to shareholders from the cash earned during the transformer boom. Typically, LP participation in a PEF is 10% to 20% of commitments, but Sanil Electric's share is 66%, leading to analysis that it effectively secures control of the fund and is positioning to use it as a "detour" for acquiring specific corporations.
In 2022, SJL Partners formed a consortium with SD Biosensor, a diagnostics company listed on the Korea Exchange, to acquire all equity of U.S.-based "Meridian Bioscience" for 2 trillion won, and, together with SKC, acquired control of NEXEON, a U.K. silicon anode startup.
SJL Partners CEO Lim Seok-Jeong, formerly of J.P. Morgan Korea, built his career at the European firm CVC Capital before founding SJL Partners. Lim is known to have been strongly influenced by a long relationship with Chairman Seo in setting up an independent fund. SJL Partners' first investment after its founding was to acquire 200 billion won worth of convertible bonds issued by Celltrion Holdings.
At the time, the investment served as a means for Chairman Seo to resolve Celltrion's chronic funding shortage, and it is known as a deal that delivered massive revenue to SJL Partners.