SK Inc., the holding company of SK Group, is in talks with Hahn & Co., a South Korean buyout firm, to sell SK Siltron Co., the country’s solo silicon wafer manufacturer, for around 3 trillion won ($2 billion), according to investment banking sources on Tuesday.
The deal is part of SK Group’s series of asset sales aimed at reducing debt accumulated during its expansionary spree since 2019.
SK Inc. is looking to unload a 70.6% stake in SK Siltron, valuing the unit at around 5 trillion won, said the sources.
The holding firm had approached only a few buyout firms to shed the wafter manufacturer since November last year. Hahn & Co. has now emerged as a strong candidate for the deal.
They are expected to sign a preliminary agreement on the deal. in the first half of this year, the sources added.
SK Siltron is the world third-largest manufacturer of semiconductor wafers, also called substrates, after Japan’s SUMCO and Shin-Etsu Chemical.
The cash cow of SK Group generate more than 600 billion won in earnings annually.
In 2017, SK Group purchased a 51% stake in SK Siltron from LG Group for 620 billion won and an additional 19.6% from financial investors.
SK Group Chairman Chey Tae-won with the remaining 29.4% stake in the unit will not put his shares up for grabs.
HAHN & CO.’S DEALS WITH SK
Hahn & Co. has been capitalizing on SK Group’s business restructuring. If finalized, SK Siltron will mark the 10th SK Group unit it has acquired since 2018, following the recent 2.6-trillion-won purchase of SK Specialty Co.
In 2018, it acquired SK Rent a Car, SK D&D Co. and SK Shipping Co., followed by SK Chemical Co.’s biodiesel division in 2020 and SKC Co.’s film business in 2022.
LOWERED VALUATION
Talks to sell SK Siltron had made little progress with private equity firms due to a valuation gap. SK Group initially sought more than 6 trillion won, but recently lowered its asking price to the 5 trillion won range.
Still, its valuation has grown fivefold since SK acquired it from LG Group. At the current estimated valuation, the divestiture of SK Siltron is expected to fetch around the mid-3 trillion won range.
In 2024, SK Siltron posted 2.13 trillion won in revenue and around 640 billion won in earnings before interest, taxes, depreciation and amortization.
NEW CASH
Including the proceeds from the sale of SK Specialty, the divestiture of SK Siltron would bring in a total of 5 trillion-6 trillion won in new cash.
SK Inc.’s net borrowings ballooned to 11 trillion won at the end of 2022 from 7 trillion won in 2019. At the end of last year, its borrowings stood at 10.53 trillion won.
Through the asset sales since last year, SK Group is moving away from its vertically integrated semiconductor production strategy, which included materials and components sourcing by SK Materials Co.
The conglomerate is now seeking to unload SK Ecoplant Co.’s environment business and battery materials producer SK IE Technology Co, while trying to took SK Enmove Co. public.
Industry observers say the second-largest conglomerate in South Korea will focus on SK Hynix Inc., the world’s largest manufaturer of high-bandwidth memory, so-called AI chips, as well as battery maker SK On Co., while also expanding into AI and software markets.
NO INVESTMENT BANKERS INVOLVED
The talks to sell the wafter manufacturer has not involved investment bankers on either SK or Hahn & Co. as was the case with the recent sale of SK Specialty.
The Seoul-based buyout firm is said to have consistently bypassed investment bankers in transactions since its inception in 2010.
By Jun-Ho Cha
chacha@hankyung.com
Yeonhee Kim edited this article.
