SK Innovation, the energy holding company of SK Group, is reportedly considering selling its subsidiary SK Lubricants to MBK Partners, a homegrown private equity fund, industry sources said Thursday.
The deal to buyout SK Lubricants ― which has been preparing for a major initial public offering by the end of this year ― is estimated to be worth 3 trillion won ($2.7 billion), according to local news reports.
“As of now, nothing has been conclusively settled. MBK’s offer is just one of the several options that SK Innovation is considering, including the possibility of an IPO, which we are still looking into,” said an SK Innovation spokesperson.
MBK Partners has offered to buy a majority stake in SK Lubricants, asserting that it “will acquire SK Lubricants under better conditions than those offered by an IPO,” according to industry sources.
If a deal is struck, SK Innovation would hand over a 75 percent controlling stake to the private equity fund and will get the right of first refusal, should the fund decide to sell SK Lubricants or pursue an IPO in the future, according to industry sources.
The recent turn of events reflects SK Innovation’s ongoing moves to secure new funds for restructuring its core business operations, as it seeks to overcome poor conditions in the oil industry ― such as volatile cracking margins and increasing competition in the global refining sector.
“We will actively sell off our nonessential assets and rechannel those funds into our core businesses,” said SK Innovation CEO Chung Chul-khil at a news conference in Seoul last month, as he vowed to “establish a profit structure that would assure the firm’s survival under any circumstances.”
Although SK Innovation was in the red for the first time in 37 years in 2014 with an operating loss of 224.1 billion won, SK Lubricants recorded 295.4 billion won in operating profits, boosted by steady sales of its well-established ZIC lubricant oil brand both at home and abroad.
Industry watchers said that MBK likely pushed for the sale of SK Lubricants after eyeing its ability to record steady profits as well as its uncontested market share in the global lubricants market.
By Sohn Ji-young (jys@heraldcorp.com)
