KT Cloud's 1 Trillion Investment Battle... The Reason for Pressing the 'Waiting Button'

CEO Koo Hyun-mo's Reappointment Issue Stalls
All Investment Matters Delayed Until Management Decision

[Asia Economy Reporter Park Soyeon] Although IMM Private Equity has gained the upper hand in the KT Cloud investment attraction battle worth 1 trillion won, it is facing difficulties due to KT governance issues.

According to the IT and investment banking (IB) industry on the 10th, the main bidding results for KT Cloud investment attraction saw participation from Kohlberg Kravis Roberts (KKR), domestic private equity funds (PEFs) IMM Credit Solution (ICS), VIG Alternative Credit (VAC), and Mirae Asset Global Investments PE division. Except for IMM PE, the other PEF operators either withdrew their investments or took a passive stance, forming a dominant position for IMM PE.

An IB industry official said, "All the PEFs that participated in the main bidding have dropped out, and now only IMM ICS remains," adding, "However, progress is difficult as it is on hold due to KT governance issues."

KT is currently conducting CEO selection, but with the final outcome uncertain, setbacks seem inevitable even in this urgent big deal.

Initially, the KT Cloud investment attraction battle heated up with a three-way competition among KKR, IMM, and VIG, and Mirae Asset PE joining in. In the sluggish capital market, the KT Cloud investment attraction battle unusually drew market attention.

At present, IMM ICS is highly likely to be selected as the preferred negotiation partner. Since it is a minority equity investment, the level of guaranteed returns related to qualified listing, call options, and drag-along rights served as important criteria.

There was also an assessment that candidates with ample dry powder (investment capacity) within blind funds or those who have secured commitments from domestic and foreign LPs are strong contenders. IMM ICS is recognized for its strength as a native PEF, considering that KT Cloud’s Internet Data Center (IDC) business’s main customers are domestic public institutions.

KT Cloud plans to raise funds within a maximum 20% equity stake. Specific investment conditions such as exact scale and price have not yet been decided. Considering the corporate value is around 4 trillion won, an investment attraction of approximately 600 billion to 800 billion won is expected.

KT Cloud provides cloud (virtual server) services to corporations and the government and operates Internet Data Centers. It ranks second in cloud services after Amazon Web Services (AWS) and is the number one operator domestically in the IDC sector. In particular, it holds an overwhelming position compared to latecomer LG Uplus (6 centers) by owning 14 Internet Data Centers nationwide.

The reason KT Cloud is seeking investment is to strengthen its cloud business sector, a new growth industry. Although it is number one among domestic companies, Naver, NHN Cloud, and Kakao Enterprise are rapidly catching up. It is necessary to secure investment funds to strengthen market dominance.

As of 2021, KT Cloud’s sales were 455.9 billion won, which is still insignificant compared to its parent company KT’s total sales of 24 trillion won. However, KT Cloud’s goal is to achieve sales of around 2 trillion won by 2026. It is expected that the cloud business will grow rapidly in line with the acceleration of digital transformation. According to KT, the domestic cloud and IDC market size is expected to grow to about 11.6 trillion won by 2025, with an annual growth rate of about 16%.

This content was produced with the assistance of AI translation services.