Teaser letters have been sent to potential buyers of a minority stake in SK Lubricants Co Ltd, the lubricant oil business arm of SK Group, with the company confident its strong presence in the high-quality lube base oil market will attract deep interest.
Citigroup Global Markets Korea Securities, which is leading the sale process, also started to sign non-disclosure agreements with some possible investors, industry sources said on Friday (September 25).
The rosy outlook for the premium lube base oil market, compared with the wider lubricants industry, will be a strong selling point. SK Lubricants produces and exports Group III base oils, used in high-quality lubricant products, to more than 50 countries across the world. The lube base oil business accounted for 88 percent of the firm’s revenue at the end of June 2019, with only 12 percent coming from the lubricants business.
SK lubricants’ lube base oil Yubase is categorized as a Group III premium product in the classification system set by the American Petroleum Institute. This means the viscosity index of the product is above 120, with the amount of sulfur less than 0.03 percent and the amount of saturates maintained at 90 percent or above.
The company’s earnings before interest, tax, depreciation and amortization amounted to 428 billion won ($365 million) last year. SK Group is selling 49 percent and reportedly wants a valuation of at least 5 trillion won for a 100 percent stake.
When SK Group was in talks with MBK Partners on the sale in 2015, the private equity firm reportedly made an offer that valued the company in a mid-2 trillion won range. (Reporting by Hee-yeon Han)