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Hyundai Oilbank set to sell oil storage arm ahead of IPO

J& Private Equity is buying a 90% stake in Hyundai Oil Terminal for about $160 mn

By Jul 16, 2021 (Gmt+09:00)

Hyundai Oilbank's refinery complex in Daesan, South Chungcheong Province, South Korea
Hyundai Oilbank's refinery complex in Daesan, South Chungcheong Province, South Korea

Hyundai Oilbank Co., a South Korean refiner, is selling a majority stake in its wholly owned Hyundai Oil Terminal Co. to a Seoul-based private equity firm for about 180 billion won ($160 million).

The stake sale comes ahead of Oilbank's initial public offering planned for next year, with the unit of the world's largest shipbuilder Hyundai Heavy Industries Group making its push into eco-friendly businesses such as hydrogen and biotechnology.

At a board meeting on Friday, Oilbank decided to sell a 90% stake in Hyundai Oil Terminal to J& Private Equity, according to investment banking sources. Oilbank will retain the remaining 10%.

Oil Terminal, spun off from the refiner in 2012, is the first Korean oil company to operate the commercial tank terminal business and one of Oilbank's cash cows. Its storage facilities built on reclaimed land in Ulsan, on the southeastern tip of the Korean peninsula, have a capacity enough to store 290,000 tons of oil and petrochemical products.

Aiming to list on the Korean bourse in the first half of next year, Oilbank is now receiving proposals from investment banks for its third IPO attempt. It will select IPO managers in the next few months.

Its enterprise value is estimated at over 8 trillion won, based on the valuation of 8.1 trillion won suggested by Saudi Aramco, the world’s biggest energy company, when it purchased a 17% stake in Oilbank for 1.4 trillion won in 2019.

In an over-the-counter market, Oilbank is traded at 66,500 won, putting its corporate value at 16.3 trillion won. The refiner turned to a profit in the first quarter of this year, led by higher oil prices. Its first-quarter operating profit came to 412.8 billion won, with sales up 2.7% to 4.5 trillion won from a year before.

Oilbank aims to reduce its refinery business from the current 85% of its business portfolio to 50% by 2030 to slash its carbon emissions and diversify its energy mix.

Hyundai Oil Terminal's facilities in Ulsan, South Korea (Courtesy of Hyundai Heavy Industries Group)
Hyundai Oil Terminal's facilities in Ulsan, South Korea (Courtesy of Hyundai Heavy Industries Group)

J& PRIVATE EQUITY

J& Private Equity, established in 2018, was drawn into Oil Terminal's stable cash flow, despite its modest growth potential.

The purchase, set to be closed next month, has attracted over 300 billion won in commitments from institutional investors who expect a 6% annual return from the deal, according to the Maeil Business Newspaper.

The three-year-old PEF's portfolio includes another Hyundai Heavy Industries Group's unit Hyundai Hyms Co., a shipbuilding parts supplier; SG Safety Corp, a producer of respirators such as chemical masks and gas and dust masks; ST Pharm Co.; and Daebo Magnetic Co., an electrical components maker.

Its 2019 investment in SJ Core Co., a Korean meal kit company focused on the popular Korean dish tteokbokki, or spicy red rice cakes, has reportedly yielded more than a 50% internal rate of return, or 8 billion won in net proceeds, from the exit the following year.

Its co-heads Lee Joon-sang and Hyun Sang-jin had previously worked at STIC Investents Inc. and SG Private Equity, respectively. Both PE firms are based in Seoul. 

Write to Chae-yeon Kim and Jin-seong Kim at why29@hankyung.com

Yeonhee Kim edited this article.

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