Singapore-based Qoo10 intends to buy SK square’s 11Street

[Courtesy of Qoo10 and 11Street]

Qoo10, a Singapore-based e-commerce platform that has purchased multiple South Korean e-commerce giants, intends to acquire 11Street Co. owned by SK square Co., in a move to enhance its presence in the online shopping market dominated by Naver Corp. and Coupang Inc.

According to multiple sources from the investment bank industry on Monday, Qoo10 has expressed its intention to SK square to acquire the management rights of 11Street. Qoo10 estimated the market value of 11Street at about 1 trillion won ($765.4 million).

Qoo10 is known to have proposed a stock swap for the acquisition.

Qoo10, led by Gmarket Inc. Founder Ku Young-bae, has been ramping up its focus on purchasing Korean e-commerce players since last year.

In 2022, Qoo10 bought TMON Inc and this year, Interpark Commerce Co. and WeMakePrice. If it successfully acquires 11Street, Qoo10 is expected to become the third-largest e-commerce platform in Korea.

According to the data from Kyobo Securities Co, the combined market share of 11Street, WeMakePrice, and TMON stood at 13.7 percent last year, surpassing that of 11.5 percent of SSG.com Corp. and Gmarket.

Industry insiders are paying attention to whether SK square accepts the proposal as the company has been under pressure to secure funds through the sale of 11Street or an initial public offering (IPO).

In 2018, 11Street secured an investment worth 500 billion won from Nile Holdings, a consortium created by the National Pension Service, MG Korean Federation of Community Credit Cooperatives (KFCC), and private equity fund H&Q Partners Korea.

The investment came with a condition of an IPO within five years. If it fails an IPO in the timeframe, 11Street must return the investment with an annual interest of 8 percent. The consortium is believed to hold a drag-along right, which allows it to force SK square to sell its stake in 11Street.

The e-commerce company selected IPO underwriters in August last year but it has yet to apply for a preliminary review for the listing. There are concerns, however, about the lower-than-expected market evaluation.

Its post-listing value was expected to be at 4~5 trillion won but there has been a consistent and skeptical market forecast of less than 2 trillion won. The consortium had set the market value at 2.7 trillion won in 2018.

Industry sources noted that Qoo10 not only has to negotiate with the largest shareholder SK square but also the financial investors for the acquisition of 11Street.

Qoo10 is known to lack cashable funds as it has acquired three major e-commerce players in just one year, raising the prospect that it will stick with a stock swap deal.