SK Square Co., an investment arm of South Korea’s No. 2 conglomerate SK Group, has suspended negotiations with Singapore-headquartered e-commerce giant Qoo10 Pte. on the Korean online retail platform 11Street deal, sources familiar with the matter said on Friday.
In late September, SK Square tapped Qoo10 as a preferred bidder for joint management of 11Street. Qoo10 estimated the value of 11Street up to 1 trillion won ($770.4 million) and was planning to attract 500 billion won from Seoul-based IMM Investment and Corstone Asia.
SK Square and Qoo10 disagreed on the swap ratio, according to sources. Qoo10 valued 11Street, which saw its number of monthly active users plunge this year, at a maximum of 1 trillion won.
But SK Square demanded a higher value than that, even if it fell short of the 2.75 trillion won that 11Street was valued at in 2018.
As negotiations have been suspended, Qoo10 will have to change its strategy for its Korean business expansion, market watchers say.
11Street logistics center in Icheon, South Korea (Courtesy of SK)
UNCLEAR PATH
It is unclear whether SK Square will tap another bidder for the sale of 11Street. China’s largest e-commerce giant Alibaba Group was a major potential buyer of 11Street until mid-September, however, the deal has fallen through amid growing negative publicity on Korean capital outflow to China.
11Street’s largest shareholder is SK Square, which owns an 80.3% stake as of end-2022. Nile Holdings, a Seoul-based joint venture between H&Q Korea Partners and Aeneas Private Equity injected 500 billion won in 11Street in 2018, holding a combined 18.2%.
Major limited partners in the JV are National Pension Service (NPS) of Korea and Korean Federation of Community Credit Cooperatives (KFCC).
Nile Holdings secured drag-along rights in October as SK Square failed in listing 11Street in the local market by September. With the rights, the PE firms can force SK Square to sell its 11Street shares when the two PE firms divest their holdings.
SK Square can exercise a call option by next month, via repayment of 500 billion won with a 3.7% annualized interest rate to Nile Holdings.
11Street posted 601.9 billion won in revenue for the first three quarters of this year, up 27.6% on-year. Its operating loss for the three quarters is 91 billion won, 14.1% less than the same period last year.
