PRIVATE EQUITY | Cesar Tordesillas, Korea

SK Group launches private equity fund for small subcontractors

SK Group launched a $85.6 million private equity fund to invest in its small subcontractors with proven growth potential.

The group said the fund was created by its three affiliates, namely: SK Securities, SK Telecom, and SK Global Chemical, along with 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.

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.

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