SK to invest $300 million in ChinData Group by joining in pre-IPO share sale

  • 2020-08-10

SK Corp. is investing $300 million (360 billion won) in Chinese data center operator ChinData Group as the South Korean company seeks to benefit from growing global demand among enterprises for cloud services.

The investment will be made by participating in a pre-IPO placement by the Beijing-based wholesale data center provider, according to investment banking sources.

SK could use its own cash or utilize its corporate partnership, or COPA fund, which it jointly launched last year with major pension funds such as the National Pension Service and the Korean Teachers’ Credit Union, they said.

Private equity firm Bain Capital took a majority stake in ChinData with a $570 million investment in May last year and merged it with existing portfolio company Bridge Data Centers to form a pan-Asian data-center platform. The combined group has nine facilities in the Asia-Pacific region, including China, India and Malaysia.

chindatagroup

ChinData Group provides hyperscale wholesale and custom-build data center solutions. The company hopes to ride on growing corporate demand for cloud services and the expansion of global cloud providers who are building and buying new data centers globally at a rapid pace.

While a traditional data center typically supports hundreds of physical servers and other IT hardware along with thousands of virtual machines, most of the new data centers being built are hyperscale centers. These house tens of thousands of servers and hardware alongside millions of virtual machines, providing ChinData, which operates hyperscale centers, more room to grow.

According to Bloomberg and other foreign media, ChinData Group, backed by Bain Capital, is planning to launch its initial public offering in the US market this year to eventually raise its corporate value to between $3 billion and $4 billion. ChinData Group has reportedly selected Citigroup, Credit Suisse Group AG and Morgan Stanley to help manage its IPO.

DEMAND FOR DATA CENTERS GROWING RAPIDLY

According to Jefferies Financial Group, demand for data centers in China is expected to grow 20% annually on average over the next three to five years.

SK Corp. is eyeing capital gains through its investment in ChinData.

SK Corp., the mainstay of the SK Group, the country’s third-largest conglomerate, has turned into an “investment holding company,” aggressively seeking investment opportunities globally since CEO Jang Dong-hyun took the helm in 2017.

SK’s active foreign investment paid off when ESR Cayman Ltd., in which the Korean company joined in a pre-IPO share sale, made a successful market debut in Hong Kong last year.

By Jun Ho Cha

chacha@hankyung.com

<Edited by In-Soo Nam>