By Park Si-soo
SK Group has launched a private equity fund totaling 100 billion won ($85.6 million) in cooperation with the state-run Korea Finance Cooperation to invest in its small subcontractors that show proven growth potential.
The group said the fund was created by its three affiliates ㅡ SK Securities, SK Telecom, and SK Global Chemical ㅡ the Korea Finance Corporation and KDB Capital.
The fund, registered with the Financial Services Commission in April, will operate under SK Securities and KDB Capital until 2018, during which they will select beneficiaries through thorough, multi-level assessment and purchase up to 5 billion won in shares of each firm as a direct investment.
“Primary beneficiaries will be firms that have ample growth potential but suffer from problems securing funds needed for research and development activities and factory expansion among others,” an SK official said. The first beneficiary is expected to be decided in August, the official said.
This is the latest in a series of “shared growth” campaigns initiated by SK. The Lee Myung-bak administration has encouraged big firms to forge win-win relationships with their subcontractors and other small and medium-sized firms.
Such calls are being intensified as the ruling Saenuri Party tries hard to maintain its grip on power in the run up to the presidential election on Dec. 19.
The Commission on Shared Growth for Large and Small Companies and the Fair Trade Commission have put immense pressure on corporate giants to follow the move, rating them in this regard and putting low performers at a disadvantage in business.
SK said the idea on the investment funds was suggested by its chairman Chey Tae-won in a meeting with heads of subcontractors in October last year.
“We should come up with measures that are not one-off but consistent and that can improve small firms’ competitiveness fundamentally,” an SK official quoted Chey as saying. The official described the creation of the funds as a “model” case of win-win growth campaigns that can secure “long-term and practical” partnerships between big and small companies.
The group plans to offer non-financial education programs for executives of its subcontractors.
Earlier, SK Group created “shared growth” funds totaling 321 billion won, providing cash-strapped subcontractors with up to 500 million won at a lower-than-market interest rate. SK Telecom, the country’s largest mobile network operator, offers various training and research programs for IT startups.