Equity Firm Buys 40% of SK

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Equity Firm Buys 40% of SK
© REUTERS / Kim Hong-Ji - stock.adobe.com

The parent company of SK Lubricants on Wednesday announced an agreement to sell 40% of the business to a South Korean private equity firm for a bit less than U.S. $1 billion. SK Innovation has said it would use proceeds to support its growing electric vehicle battery unit.

In a written statement posted to its website, Seoul-based SK Innovation said the transaction – which has been the subject of numerous news reports in recent weeks – was approved by its board of directors on Wednesday. Representatives then signed the sales contract with IMM Credit Solutions, a subsidiary of IMM Private Equity, which is also based in Seoul.

The price was 1.1 trillion won, after deducting for payoff of debt and other items.

SK said the deal will lead to further expansion of the base oil and lubricants business.

“This proves that SK Lubricants’ market dominant business capabilities and the potential for future growth in new businesses are well recognized in the financial market,” SK Innovation said in its statement. “We will work with IMM … to strive for SK Lubricants’ second leap and growth.”

SK Innovation – which is part of one of South Korea’s largest industrial conglomerates, SK Group – has previously indicated, however, that it was conducting the divestment to raise money for its battery business, which is striving to become a major supplier to the burgeoning electric vehicle market.

SK Innovation is close to completing construction of two factories in the United States that have contracted to sell batteries for Ford and VW electric vehicles. The factories are major cogs in SK’s strategy but were at risk earlier this year after the International Trade Commission indicated its intention to side with rival LG Energy Solutions in a suit accusing SK Innovation of stealing trade secrets. An ITC court intended to prohibit the factories from operating – except to make limited sales to Ford and VW – unless the two companies reached a settlement.

U.S. President Joe Biden’s administration considered that enough of a threat to its own policies of supporting the industry that it weighed in to facilitate a settlement. Earlier this month LG agreed to drop the suit in exchange for $1.8 billion in cash and future royalties.

SK Lubricants is by far the world’s largest producer and merchant supplier of API Group III base stocks. The deal with IMM means that it joins three other South Korean base oil suppliers in being a joint venture. Saudi Aramco, the world’s largest oil company, owns 63.4% of S-Oil. GS Caltex is a 50-50 joint venture between GS Energy and Chevron, and Hyundai Shell Base Oil is a 60-40 JV between Hyundai Oilbank and Royal Dutch Shell.

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