SK Innovation announced last week that it was considering selling a stake in SK Lubricants, but then the parent company said Monday that it decided against such a sale.
The short filing announcement came after South Korean newspapers reported that SK Lubricants would be sold to private equity firm MBK Partners. The Korean Stock Exchange asked SK Innovation to comment on the matter, and the company filed a short statement June 11 saying that it was considering selling the base oil and lubricant supplier or conducting an initial public stock offering for it.
Yesterday SK Innovation filed a second statement advising that it had halted discussions with the other party about selling a stake in SK Lubricants.
The June 11 filing explained that the parent company is considering ways in which it might help its financial state. The company suffered its first operating loss in 37 years in 2014 and is now restructuring by selling off non-core business units and unused real estate assets.
We have been seeking variousoptions to secure investment resources and to improve our financial structure. An IPO or sale of SK Lubricants are being considered as part of them,the filing stated. It went on to add, But there is nothing determined yet. We will file againwhen the pertinent matters are determined or in a month (on 10th July).
Last month SK filed documents asking the stock exchange for an examination to determine its eligibility to conduct an IPO. The company originally filed papers preparing for an IPO in 2012 but shelved the plan not long afterward.
SK Lubricants is the worlds third-largest manufacturer of base oilafter ExxonMobil and Shell,with capacity to produce 3.5 million metric tons per year, including plants in which it has joint venture stakes. It isthe largest supplier of API Group III base oils.
News reports about the potential sale of SK Lubricants said South Korean private equity firm MBK Partners had offered to pay between 2.5 trillion and 3 trillion won (U.S. $2.2 billion to $2.7 billion). The companies reportedly discussed formation of a purchasing company in which SK would own a minority stake.
Stock analysts told Lube Report Asia that such a sale would likely have raised more money than an IPO, which would be expected to yield around U.S. $1 billion – approximately a third of the present value of SK Lubricants. But of course an IPO would leave SK Innovation owning a larger stake of SK Lubricants.