Qoo10 walks away from 11th Street stake sale deal

SK Square, SK Group’s investment unit, has scrapped negotiations with Singapore-based e-commerce giant Qoo10 on selling shares of its online retail platform operator 11Street, according to local retail industry sources, Sunday.

SK Square is not expected to resume talks with Qoo10 and may search for other investors who are interested in making an investment in 11Street, the sources said.

Since September this year, SK Square had been in talks with Qoo10 for sale of an 18.2 percent stake in 11Street, which is currently owned by Nile Holdings, a Seoul-based joint venture consisting of the National Pension Service, the Korean Federation of Community Credit Cooperatives and private equity fund H&Q Korea.

In 2018, Nile Holdings invested 500 billion won ($385 million) in 11Street to acquire the 18.2 percent stake on the condition that 11Street goes public by Sept. 30, 2023.

However, 11Street’s initial public offering plan backpedaled due to unfavorable market conditions amid the limping economy, and SK Square decided to sell the 18.2 stake to other investors instead of pushing ahead with the IPO.

In October, talks on the stake sale developed as Qoo10 was reportedly considering a share swap agreement with 11Street.

However, SK Square has decided to suspend talks with Qoo10 as they had different perceptions on the value of 11Street and failed to agree on the swap ratio, according to the sources.

When Nile Holdings purchased the 18.2 percent stake in 2018, the value of 11Street reached 2.7 trillion won. However, Qoo10 estimated the current value of 11Street at 1 trillion won.

As SK Square has failed to seal a deal with Qoo10, the company now has to search for other investors who can take over the stake. Currently, 11Street’s US partner Amazon and China’s largest e-commerce giant Alibaba Group have emerged as potential buyers.

According to local reports, there have already been talks between SK Square and Amazon for Amazon's possible investment in 11Street.

However, if SK Square fails to secure a business partner, the company may have to repurchase the stock owned by Nile Holdings. Nile Holdings also has drag-along rights to sell the stake to a third party.

Meanwhile, SK Square posted an operating loss of 561 billion won in the third quarter of this year. The company said it will make changes to its business portfolio as the company posted operating losses for the fourth consecutive quarter.