IMM Private Equity to acquire 40% stake in SK Lubricants for $900 million

Seoul-based IMM Private Equity will acquire a 40% stake in South Korea’s SK Lubricants Co., wholly owned by SK Innovation Co., for about one trillion won ($900 million).

According to investment banking sources on Apr. 22, IMM PE will sign a sale and purchase agreement next week to conclude the deal with SK Innovation and sale manager Citigroup Global Market Securities. The Korean PE firm estimated SK Lubricants’ enterprise value at about 2.5 trillion won, the sources said.

SK Lubricants, the world’s largest lube base oil supplier, was put up for sale in August 2020, as the parent company sought new funding to expand its electric vehicle battery business.

In March this year, SK attracted binding bids from four interested parties, including another Korean PE company, Korea Investment Partners, and Japan's biggest refiner Enoes Corp.

Sources said IMM PE fiercely competed with Korea Investment Partners to win the bid by offering better terms, including non-price factors, which they didn’t identify.

As the second-largest shareholder of the lube base oil company, IMM PE will only play as its financial investor, while leaving the management right with SK Innovation and SK Lubricants.

For IMM PE, the latest deal marks its first investment from its credit fund launched in the second half of 2020.

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The stake sale of SK Lubricants comes after its previous attempts in past years to go public or sell up to 49% of the company all fell through due to valuation gaps between the company and investors.

SK Lubricants, which sells products under the SK ZIC brand, have largely been posting profits since it was spun off from SK Innovation in 2009. Last year, SK Lubricants posted 293.9 billion won in operating profit on revenue of 3.37 trillion won.

SK Innovation, Korea’s largest oil refiner, is said to be using the proceeds from the stake sale to help finance its EV battery plants in the US.

SK Innovation is currently constructing two battery plants in Georgia, US, which will supply EV batteries to Ford Motor Co. and Volkswagen AG. The first plant is set to begin operations in the first quarter of next year, with the second plant scheduled for mass production in 2023.

Write to Chae-Yeon Kim at Why29@hankyung.com
In-Soo Nam edited this article.