South Korean lubricants producer is eyeing Shell's former venture in a bid to crack the Chinese market
A strategic acquisition Image: SK Lubes |
SK Group has entered into a bidding war with several private equity firms, including Blackstone Group, for a 75% share in Beijing Tongyi Petroleum Chemical Co, China's leading lubricants maker.
Beijing Tongyi had reportedly been struggling over the past year due to low oil prices, prompting Royal Dutch Shell to dispose of the company as part of a wider restructuring plan.
Analysts had originally estimated the deal would bring in around $500m for the Anglo-Dutch concern, but as competition heats up many believe the 75% stake could sell for more than $620m. Shell had stated it would agree a purchaser by June 3rd, but has since extended the bidding process, aiming to extract more value from its lube-producing asset.
Purchasing Tongyi would transform SK Group, a relatively small player in China, into the largest lubricant supplier in the market practically overnight. The Group, which increased operating profit by 86% to 289.9bn won ($259m) last year, could also bring new efficiencies to the struggling lubes unit.
Tongyi has three blending plants in China that focus on producing low to mid tier lubes, although Shell had made improvements to the company's high-end offering.