SK Explores Sale of SK Lubricants

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South Korean conglomerate SK Innovation announced last week that it hired Citigroup Global Markets to help it explore the possibility of selling subsidiary SK Lubricants, the world’s largest producer of API Group III base stocks.

SK Innovation’s profitability has nosedived this year, and the company is looking for cash to expand its new business making batteries for electric vehicles.

The company told Reuters that it is in early stages of exploring its options and has not decided how much of a stake in SK Lubricants it may offer. Korean Investors reported that the company will look to maintain control of the base oil company but would consider selling the whole business for the right price.

SK Innovation attempted three times in the past seven years to raise money through initial public stock offerings of SK Lubricants, but it backed away each time after deciding that the market was undervaluing the business. The Aug. 13 report by Korean Investors said that ExxonMobil showed interest in buying the business last year.

Along with refining and base oil rival S-Oil, SK Lubricants has been a darling of South Korea’s business world, but its profitability declined the past few years, from 493 billion won (U.S. $414 million) in 2017 to 294 billion won last year.

SK Lubricants is by far the world’s largest Group III supplier, with production in South Korea, Indonesia and Europe. In recent years the company explored the possibility of establishing production in North America. The company also produces and markets finished lubricants.

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