SK Eyes Funds from Lubes Business

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SK Innovation is reportedly preparing to accept final bids for a 49% stake in SK Lubricants, and news organizations are speculating that the company could use proceeds for an expensive settlement involving its beloved battery business.

The Seoul-based holding company hired Citigroup Global Markets to help it explore a potential sale of SK Lubricants, the world’s largest supplier of API Group III base stocks. SK Innovation did not say how much of a stake it wanted to sell, but news organizations have since reported that it received expressions of interest from a number of bidders for a 49% stake.

News website Chosun Biz reported yesterday that final bids are scheduled to be submitted on Feb. 26. Chosun and other organizations have mentioned that the list of potential bidders includes domestic and foreign investment firms.

SK Innovation has reportedly valued SK Lubricants at 5 trillion won (U.S. $4.5 billion) and expects to reap approximately 2 trillion won by selling 49% of SK Lubricants.

SK Innovation has said it wanted to sell part of SK Lubricants to raise cash for its battery business, which is relatively new but is striving to become a major supplier for the burgeoning electric vehicles industry. The battery business suffered a setback this month, however, when the United States International Commission announced a preliminary default decision that it would be banned for 10 years from selling batteries in that country because it infringed on trade secrets of competitor LG Energy Solutions.

The ruling would permit a temporary exception for SK Innovation to supply two automakers in the U.S. if it uses American battery materials, but some analysts contend that doing so is not practical. Such a ban would be a huge blow to SK Innovation’s plans for its battery business, which has already invested in two factories in the U.S.

SK Innovation could avoid the ban if it settles a lawsuit that LG has filed against it. News organizations have speculated that a settlement could cost between 3 trillion and 5 trillion won. The Chosun article, and others, speculated that proceeds from the SK Lubricants sale could be put toward a battery settlement.

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