Expected to Raise 2 Tril. Won through Stake Sale
SK Innovation is moving to sell part of its stake in SK Lubricants, which is the world’s largest producer of Group III lubricant base oil used for producing high-end lubricants.
The company has put up for sale 49 percent of 100 percent stake in SK Lubricants. It is hoping to secure 2 trillion won through the stake sale. The stake sale is drawing attention as SK Innovation has to pay compensation to settle its battery dispute with LG Energy Solution.
Companies that participated in a preliminary tender has recently completed due diligence on SK Lubricants. The short list included financial investors (FIs) and foreign strategic investors (SIs). The main tender is due on Feb. 26.
SK Innovation estimates the value of its 100 percent stake in SK Lubricants at around 5 trillion won. When SK Innovation pushed for an IPO of SK Lubricants in 2018, its corporate value was estimated at 5.2 trillion won. The IB industry estimates the sale price of the 49 percent stake at around two trillion won as stake does not carry a control premium.
Until the third quarter of 2020, SK Lubricants’ operating profit was 136.6 billion won, down 34.0 percent from 207 billion won of a year earlier. During the same period, its sales fell 21.8 percent from 2,517.2 billion won to 1,966.6 billion won.
Although its sales dropped, SK Lubricants enjoyed a 35 percent share in the global market for Group III lubricant base oil, which is a raw material for high-end lubricants, as of the end of 2020. The market for high-end lubricants is growing rapidly thanks to measures to tighten regulations on automotive emissions and boost fuel efficiency. Industry insiders predict that this market will grow 13 percent annually by 2025. In fact, SK Lubricants’ lubricant sales spiked from 52,000 kiloliters in the first quarter to 78,000 kiloliters in the fourth quarter in 2020. Investors are interested in SK Innovation’s sale of the minority stake in SK Lubricants because of the lubricant market’s big growth potential.