SK Shelves IPO Again

SK Innovation on Thursday retracted itsapplication to conduct an initial public stock offering for its base oil and lubricants subsidiary, SK Lubricants. The South Korean energy giant said it shelved the IPO plan – for the second time in two years – out of concern that the stock would be undervalued.

We filed for the stock market listing of SK Lubricants in May, but finally we have decided to stop the public offering process, SK stated in a filing with the Korea Stock Exchange.

Officials added that the parent companys performance, on the other hand, has improved to the point of reducing the need for a cash infusion.

The operating performance and financial structure of SK Innovation have improved much more than our expectation, Lee Baehyun, head of SK Innovations management and planning office, said at the companys earnings conference call, also held Thursday. Therefore, we have seen the urgency for going IPO with SK Lubricants has dissipated.

Also considering the operating performances of SK Lubricants and its business performance, we believe that at this point in time, it is [better]to exert our efforts to improve the profitability and upgrade the business model of SK Lubricants”, Lee explained.

SK Lubricants filed an application on May 14 to be examined for eligibility to sell stock as a way of raising money to improve the financial standing of its parent company. Last month SK Innovation also ended the publicly announced consideration of a partial sale of SK Lubricants.

Analysts said the companys changes in direction could hurt investor confidence.

SKs withdrawal of the IPO plan is putting downward pressure on the stock price of SK Innovation, along with drop in the crude oil price, Lee Jiyeon, stock analyst of IBK (Industrial Bank of Korea)said in a report about the company.

The withdrawal of IPO application, however, is not totally uncommon in the country, according to Korea Stock Exchange data. Four other IPO applications were withdrawn at various stages this year.

SKLubricantsis the worlds third-largest manufacturer of base oilafter ExxonMobil and Shell,with capacity to produce 3.5 million metric tons per year, including output from plants in which it has joint venture stakes. It isthe largest supplier of API Group III base oils.