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Stake sale

Global oil refiners, local PEs among 7 bidders for SK Lubricants stake

By Nov 30, 2020 (Gmt+09:00)

SK Lubricants CEO Cha Gyu-tak unveils a new company slogan 'Make It Move, Make It Green' in October.
SK Lubricants CEO Cha Gyu-tak unveils a new company slogan 'Make It Move, Make It Green' in October.

Global oil refiners, strategic investors and private equity funds in Korea and abroad have submitted non-binding bids for up to 49% of SK Lubricants Co., up for sale by its parent SK Innovation Co.

SK Innovation and its sale manager Citigroup Global Market Securities on Nov. 30 attracted a total of seven bids from interested parties, according to local investment banking industry officials.

SK Innovation, which owns 100% of the world’s largest lube base oil supplier, put the affiliate up for sale in August to raise money for the expansion of its other businesses, such as rechargeable batteries for electric cars.

The potential buyers, whose names were withheld, were asked to purchase between 30% and 49% of SK Lubricants.

SK Innovation, which estimates SK Lubricants’ enterprise value at more than 5 trillion won ($4.5 billion), hopes to raise at much as 2.5 trillion won from the stake sale.

The company is also considering forming a joint venture with some of the prospective buyers, sources said.

Some global oil refiners and petrochemical companies are known to be among the preliminary bidders, they said.

Last year, ExxonMobil Corp., a US-based oil and gas company, expressed its intent to forge a strategic tie-up with SK with a stake purchase of more than 5% in SK Lubricants. But talks broke down for unclear reasons at the time.

VALUATION GAP REMAINS HURDLE FOR STAKE SALE

The planned stake sale comes after SK Lubricants' previous attempts to go public fell through twice due to valuation gaps between the company and investors.

SK Lubricants, which sells products under the SK ZIC brand, have largely been posting profits since it was spun off from SK Innovation in 2009. Last year, SK Lubricants posted 293.9 billion won in operating profit on revenue of 3.37 trillion won.

A valuation gap between the seller and investors will likely pose a hurdle for the stake sale, given the rise of electric vehicles, which use less grease than combustion vehicles.

SK Innovation, the country’s largest oil refiner, has invested heavily in EV batteries as part of its business diversification.

According to market research firm SNE Research, SK Innovation ranked fifth in the global EV battery market with a 5.5% share in the first nine months of the year.

Write to Jun Ho Cha and Ri-ahn Kim at chacha@hankyung.com

In-Soo Nam edited this article.

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