SK Square informed Qoo10 in the middle of this month that it would not proceed with negotiations for the sale of 11th Street. Attention was drawn to the background of SK Square, which was urgent to return the funds of 11th Street Financial Investor (FI), which first notified the breakdown of negotiations. As expected, the negotiations with Q10 were in fact in the form of SK Square exercising 11st FI’s drag-along right to claim on its behalf and providing a way to recover.
Q11 has been interested in 11th Street with the goal of creating synergy effects in the domestic e-commerce market with SK Square. Various discussions continued, including the exchange of 11th Street and Q10 shares, but SK Square appears to have had doubts about Q11’s corporate value or long-term vision. Unless Q11 or a new investor directly purchases 11st shares, it is difficult to be sure of FI’s recovery.
The possibility of raising new investment funds was also unclear. IMM Investment and Koston Asia planned to raise 500 billion won from Meritz Securities to form a fund and invest it in Q10. At this time, it is said that Meritz Securities’ requirements were quite strict. Since it was a highly difficult transaction, Meritz Securities’ requested interest rate was bound to be high.
It is reported that Meritz Securities requested a payment guarantee from SK Square. If Meritz Securities’ investment is converted into Q10’s shares, the certainty of recovery will be low, so the intention is to secure the stability expected from SK Group. However, from SK Square’s perspective, it was difficult to respond to the payment guarantee because it was not the party directly receiving the money, and it appears that it ended up folding the negotiation table first. If Q10 wants to secure 11th Street, it is expected that it will have to pay funds directly in the future sale process.
SK Group established a Southeast Asian investment corporation in 2018 and invested in Masan Group, Vietnam’s No. 1 food and beverage company, and Vietnam’s Samsung Vingroup. Since last year, as market liquidity has decreased, SK Group’s expansion policy has been put on hold, and the burden of recovery for Southeast Asian investment corporations that invested funds from major affiliates has also increased.
There were attempts to sell these assets this year as well. Meritz Securities showed interest and is said to have also requested safety measures from SK Group. When SK Group invested in Vietnamese companies together with FI, it set a condition that if the investment value fell below a certain level, the Vietnamese company would replenish collateral, and if the loss was greater, SK Group would take the loss before the investor. If SK Group withdraws from investment, the obligation to guarantee safety also disappears, and Meritz Securities is said to have requested a payment guarantee from SK Group to prevent the risk of loss.
An investment industry official said, “The deal fell through as Meritz Securities requested a payment guarantee from SK Square in case Q10 would not return the investment,” adding, “The Masan Group investment share transaction also broke down as Meritz Securities requested SK Group to provide a payment guarantee.” “I lost,” he said.
In response to this, Meritz Securities said, “At the beginning of the (11st) transaction discussion, SK and Q10 decided to accept the relevant (payment guarantee) conditions and began due diligence,” adding, “Afterwards, the transaction was halted as an agreement could not be reached in the process of calculating the stake value.” “He explained the reason for the collapse of the transaction.
As concerns about domestic and foreign real estate investments by domestic securities companies grow, new real estate transactions have almost disappeared. Meritz Securities also took a direct hit from the real estate market recession and downsized its related organizations. In the future, it is expected that efforts will be focused on the corporate finance field, and it is highly likely that a strategy will be implemented to squeeze out companies with poor financial conditions.
The fact that his name frequently appears in SK Group-related transactions does not seem to be unrelated to this situation. SK Group implemented a rapid expansion policy by utilizing the capital market, but the burden increased as liquidity tightening continued. It has become difficult to recover FI funds through IPO or M&A, and even large financial companies are cautious about investing in SK Group. Meritz Securities, which conducts aggressive business at times of greatest pressure, deserves the opportunity.
Another investment industry official said, “Meritz Securities, which has found it difficult to make new real estate transactions, will focus on corporate finance,” adding, “Meritz Securities, which is accustomed to high risk and high returns, has a strategy of visiting companies with temporary financial difficulties and executing funds at high interest rates. “There is a high possibility that it will unfold,” he said.
Among SK Group affiliates, some received help from Meritz Securities. SK Eco Plant was planning to attract FIs by acquiring Singapore waste company TES, which it acquired early last year, but the private equity funds (PEFs) that received the offer abandoned their investment plans. Afterwards, Meritz Securities spent hundreds of billions of won to secure a minority stake in the TES acquisition corporation.
Meritz Securities also invested 323.6 billion won in SK Eco Plant exchangeable bonds (EB), which are exchangeable for Renew One (formerly Daewon Green Energy) stocks this year. The EB maturity is 30 years and the interest rate is 8.45%. SK Eco Plant, which aims to be listed, needed investment money to increase its corporate value, and Meritz Securities was able to ease the burden by entering the market.
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