The acquisition race for SK Siltron, a semiconductor wafer manufacturer, is accelerating as part of SK Group's business rebalancing efforts. The shortlist of qualified preliminary bidders, including domestic and international private equity funds, is expected to be finalized by the end of this month. A new owner could be determined as early as the third quarter of this year.
According to the investment banking industry and other sources on June 11, five to six parties, including domestic and international private equity funds, are currently conducting preliminary due diligence for the acquisition of SK Siltron's management rights. The preliminary bid was originally scheduled for June 9, but the deadline for submitting letters of intent (LOIs) was extended by more than a week at the request of potential buyers who need to secure significant funding for the deal.
However, it has been confirmed that no LOIs have been submitted yet. As a result, intense strategic maneuvering among bidders is expected to continue until the last minute. Once the shortlist is finalized within this month, negotiations on detailed terms and the selection of a final preferred bidder will follow, with the deal potentially concluding as early as the third quarter.
SK Siltron is the only specialized company in South Korea that manufactures semiconductor wafers, a key foundational material for semiconductor chips. The company ranks third in the global market for 12-inch wafers.
Industry sources estimate that the value of SK Siltron’s shares, based solely on its existing silicon (Si) wafer business, exceeds 5 trillion won (based on 100% equity). The valuation of the silicon carbide (SiC) wafer business, which is considered a future growth area, remains a key variable.
For the Si wafer business, earnings before interest, taxes, depreciation, and amortization (EBITDA)?an indicator of a company’s cash flow?stood at about 700 billion won last year on a standalone basis. The industry expects a similar level this year, and with the semiconductor market recovering, forecasts suggest that EBITDA could return to the 2022 level of approximately 1 trillion won next year.
Currently, the average EBITDA multiple for comparable Si semiconductor wafer companies such as Shin-Etsu and SUMCO in Japan, GlobalWafers in Taiwan, and Siltronic in Germany is around 7 to 8 times. Taking into account a management control premium and approximately 2 trillion won invested in expanding new Si wafer plants in South Korea, the valuation of SK Siltron’s Si wafer business could exceed 7 trillion won, or 10 times EBITDA.
After deducting SK Siltron’s net debt of about 2 trillion won, the equity value is calculated to be over 5 trillion won. In this case, the value of the 70.6% stake held by SK Inc., which is being sold in this transaction, would amount to approximately 3.5 trillion won.
The key issue is the valuation of SK Siltron CSS, the U.S. subsidiary that manufactures SiC wafers mainly used in power semiconductors for electric vehicles. SK Siltron CSS was established in 2019 when SK Siltron invested about $450 million (approximately 536 billion won) to acquire the SiC wafer business unit from DuPont. Due to a temporary demand stagnation in the electric vehicle market, SK Siltron CSS’s EBITDA was around minus 60 billion won last year. However, there are projections that the business could turn profitable this year thanks to cost reductions from improved productivity.
As a result, potential buyers are reportedly divided in their assessment of SK Siltron’s SiC wafer business?some focus on synergies with the existing business and future growth potential, while others are concerned about future uncertainties.
An SK Group representative stated, "Nothing has been specifically decided as of yet."
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