Amid the ongoing sale of SK Innovation’s equity in the Boryung liquefied natural gas (LNG) terminal, more buyers than initially expected have reportedly expressed interest. As the preliminary bidding was successful, the estimated sale price has risen from the previous 500 billion won to around 600 billion won.
The industry believes that this acquisition process will effectively unfold as a competition between IMM Investment and foreign management companies. Some analysts suggest that IMM Investment may have the upper hand. Even after SK Innovation sells its equity, GS Energy will retain a 50% stake, making candidates that can create synergy through future partnerships with GS Energy more advantageous. IMM Investment has a history of investing in two subsidiaries of GS Energy.
According to the investment banking (IB) industry on the 11th, it has been reported that more than 10 participants, including IMM Investment, Stonebridge Asset Management, Macquarie Asset Management, iSquared Capital, and the Canada Pension Plan Investment Board (CDPQ), took part in the preliminary bidding held on the 7th for the Boryung LNG terminal equity sale.
Initially, SK Innovation intended to invite only 6 to 7 pre-selected candidates for a limited competition in the preliminary bidding. However, it is reported that more candidates showed up than expected following rumors.
The sale target is a 50% stake in the Boryung LNG terminal owned by SK Innovation. The Boryung LNG terminal was established in 2013 by SK E&S (now SK Innovation) and GS Energy, each investing equally, and even after SK Innovation sells its stake, GS Energy is expected to remain the joint largest shareholder with the remaining 50% stake.
An IB industry insider noted, “GS Energy is the optimal partner for cooperation,” adding, “Considering that GS will continue to handle operations and that even after SK Innovation sells its stake, it will maintain a contractual relationship with the Boryung LNG terminal for at least the next 20 years, this deal is gaining popularity.”
According to the industry, SK Innovation has already signed a long-term Terminal Usage Contract (Terminal UC Agreement) with the Boryung LNG terminal. From the perspective of the Boryung LNG terminal, revenue from SK is expected to continue for more than 20 years.
While SK Innovation is the primary entity for this equity sale, industry insiders suggest that it may take GS Energy’s management position into account when selecting candidates. This is because they will be partners sharing equity equally.
Among domestic asset management firms, IMM Investment is a candidate drawing attention in the IB industry. IMM Investment has appointed Citigroup Global Markets Securities as its acquisition advisory firm and is conducting due diligence.
GS Energy and IMM Investment are known to have a close relationship. In 2021, IMM Investment acquired a 49% stake in GS Energy’s subsidiary GS Power for about 1 trillion won. Earlier, in 2015, it also purchased a 20% stake in GS Energy’s affiliate Incheon Comprehensive Energy for 30 billion won.
As this acquisition battle is likely to turn into competition between IMM Investment and global asset management firms, another factor to watch is the borrowing rate. If the borrowing rate is high, buyers may find it difficult to bid high prices because future revenues will inevitably decline. An IB industry insider remarked, “Ultimately, candidates who can draw money cheaply for investment may propose aggressive prices, increasing their chances of being selected.”
Source: CHOSUNBIZ