Hahn & Co. to acquire entire stake in SK D&D, seek voluntary delisting

SK D&D's sustainability management report published in a web-based format, June 28, 2024 / Courtesy of SK D&D

Hahn & Co. will acquire SK Discovery’s entire stake in SK D&D and proceed with a voluntary delisting of the company, according to an electronic disclosure Wednesday.

SK D&D, a real estate developer, has been jointly managed by Hahn & Co. and SK Discovery.

Through the plan, Hahn & Co. is expected to increase its managerial flexibility by privatizing SK D&D and accelerating its exit strategy.

SK Discovery is also anticipated to streamline its portfolio by divesting its real estate development unit, considered non-core, and focusing on its main businesses in energy and biotechnology.

According to the Financial Supervisory Service’s electronic disclosure system, a special purpose company (SPC) established by Hahn & Co. has signed a share purchase agreement (SPA) with SK Discovery to acquire some 5.82 million common shares, representing a 31.27 percent stake, for about 74.2 billion won ($53 million).

The SPC then plans to purchase all of the roughly 7 million remaining shares through a public tender offer, with the aim of voluntarily delisting SK D&D.

The tender offer price has been set at 12,750 won per share, the same as the price paid for SK Discovery’s stake, effectively granting minority shareholders the same management premium.

This represents a 13.9 percent premium over Tuesday’s closing price of 11,190 won, and premiums of 24.4 percent, 26.4 percent, 32.8 percent and 46.3 percent compared with the average share prices over the past one, three, six and 12 months, respectively.

The offer will run through Oct. 29.

The SPA with SK Discovery is set to be completed either one month after SK D&D’s delisting or six months from the contract signing date, whichever comes earlier, unless the parties agree otherwise.

Hahn & Co. initially invested in SK D&D in 2018 and has since comanaged the company with SK Discovery as a joint controlling shareholder.

The private equity firm decided to pursue delisting, noting that SK D&D’s real estate development business requires quarterly performance disclosures, making it less suitable for a publicly listed company catering to general investors.

Real estate development businesses typically involve large up-front capital expenditures and borrowings for long-term projects, with profits recognized only upon project completion. If projects do not go as planned, losses can occur and additional funding may be needed, reflecting the sector’s inherent risks.

This business structure makes it difficult to maintain stable earnings and have the company’s value be accurately reflected in its share price.

Due to these structural characteristics, it is also uncommon to see real estate development companies listed even in overseas markets.

“Through seven years of joint management of SK D&D, we have gained substantial knowledge and expertise in real estate development,” a Hahn & Co. official said. “We aim to enhance long-term corporate value by converting SK D&D into a privately held company.”