Securing Funds for Expansion to Increase Electric Vehicle Battery Market Share
SK IET Listing and Affiliate Corporate Bond Issuance to Raise Cash
[Asia Economy Reporter Yoonju Hwang] SK Innovation has decided to sell up to 30% of its stake in its valuable affiliate SK Lubricants to secure investment funds for electric vehicle (EV) batteries. This move is interpreted as a proactive effort to secure investment funds in anticipation of a surge in demand for EV batteries ahead of the popularization of the electric vehicle market.
On the 14th, SK Innovation announced that it is considering selling 20-30% of its stake in SK Lubricants to raise funds needed for future businesses such as EV batteries. To this end, Citigroup Global Markets Securities has been selected as the lead manager for the sale, and investment memorandums (IM) have been sent to potential investors interested in acquiring the stake.
SK Lubricants is a wholly owned subsidiary of SK Innovation, producing lubricating base oils. It is the number one company in the domestic lubricating base oil market and maintains the world's top market share in the high-value-added product market (Group 3 base oils), which has high growth potential. Previously, SK Innovation considered selling its stake to the private equity fund MBK Partners in 2015, but the deal fell through due to disagreements over the price. Subsequently, an initial public offering (IPO) was attempted but the listing process was also halted.
The reason SK Innovation is reconsidering the sale of its stake in SK Lubricants is to secure investment funds for its new business in EV batteries. SK Innovation plans to expand its EV battery production capacity from the current 4.7 gigawatt-hours (GWh) to 100 GWh by 2025. The industry estimates that at least 10 trillion won will be needed for this expansion.
Since 2018, SK Innovation has invested more than 6.5 trillion won in three countries: China, the United States, and Poland in Europe. As part of this, it has also announced plans to list its display and battery parts subsidiary SK IET (SK iTechnology). Additionally, to secure funds for debt repayment and operations, affiliates such as SK Energy (550 billion won), SK Lubricants (300 billion won), SK General Chemicals (400 billion won), and SK Incheon Petrochem (300 billion won) have all issued corporate bonds this year.
This aggressive investment is driven by concerns that EV battery supply may fall short starting in 2022. The industry forecasted the global supply of EV batteries at 776 GWh in 2023, but actual demand is expected to reach 916 GWh. This is why the three domestic battery companies, including SK Innovation, have continued investing in the battery business despite the COVID-19 pandemic. In particular, SK Innovation, a latecomer, is showing its determination to expand market share through large-scale investments.
An industry insider said, "The current market value of the SK Lubricants stake for sale is expected to exceed 1 trillion won," adding, "Whether the stake sale will be successful depends on market prices and the situation of potential buyers."
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