M&A spree

KKR makes a killing as SK Group extends spree with KCF swoop

The Korean conglomerate splashes out $1 billion on the world’s largest copper foil manufacturer, paying almost four times what KKR paid less than 18 months earlier.

SK Group's purchase of copper foil maker KCF Technologies for W1.2 trillion ($1 billion) continues the Korean conglomerate's crusade for new revenue sources and seals what appears to be a hefty profit for seller KKR.

In pursuit of the business divested by the US private equity giant, the energy-to-communications chaebol fended off other suitors, including Loreansteel giant POSCO, according to a source familiar with the situation.

For KKR, which only acquired KCFT from LS Group for $253 million in February 2018, the deal represents a near-quadrupling of its money, but only after doubling the firm's production capacity with new factories. It is unclear how much additional capital KKR injected into the business. 

SK Group will make the purchase under its listed unit SK Chemical and will settle about 60% of the payment with bank borrowings.

Thursday’s announcement is just the latest of a run of acquisitions by SK after group chairman Chey Tae-won spoke of the need to diversify the business and find new growth drivers in 2017.

Since then, SK has been on a major spending spree, both at home and abroad.

The biggest deal was SK Hynix’s $3.6 billion investment in Toshiba’s memory chip business in 2017, which was part of a $18 billion acquisition by an international consortium that also comprises Bain Capital, Apple and Dell. SK said Toshiba’s advanced chip technology could support its semiconductor business in SK Hynix.

More recently, SK has also built a strong presence in the fast-growing Vietnamese market by investing $1 billion in local conglomerate Vingroup and another $470 million in Masan Group.

It has been active in the domestic market too, having purchased homegrown security firm ADT Caps last year for $1.2 billion, together with Macquarie.

In addition, SK is expected to to participate in the auction of Asiana Airlines, the distressed airline currently being sold by Kumho Asiana Group.

By adding KCF Technologies to its portfolio, SK is looking to strengthen its automotive battery business under SK Innovation by ensuring the supply of copper foil, one of the core materials for making batteries that powers electric vehicles (EV).

According to SK, a typical EV requires about 40 kilograms of copper foil – about 10,000 times the amount used to make a smartphone.

Copper foil is a core metal for making batteries for electric vehicles

KCF Technologies, formerly known as LS Mtron, is the world’s largest manufacturer of copper foils with a 15% market share. It supplies its products to major EV battery makers including LG Chem, BYD and Panasonic.

“Considering its growth, profitability and market size, we decided to select copper foil, a core material for electric vehicle batteries, as our new growth engine,” SK Chemical said in a regulatory filing. 

SK also owns a stake in Lingbao Wason after investing $240 million to become the second-largest shareholder of China’s largest copper foil maker last year.

KKR said the transaction is subject to customary regulatory approvals.

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