이 기사는 2021년 05월 03일 07:39 thebell 에 표출된 기사입니다.

Hyundai Oilbank is weighing up the possible participation in the race for South Korea’s largest vegetable oils and animal fats manufacturer Dae Kyung Oil & Transportation (DK O&T), industry sources said on Thursday.

The nation’s major refiner is reportedly in talks with a financial investor to form a consortium before it enters the due diligence process. BoA Merrill Lynch is acting as financial advisor to DK O&T.

Founded in 1995, DK O&T is the country’s largest animal fats manufacturer with a market share of around 40%. The wholesale and distribution of eco-friendly energy using vegetable oils is expected to be the basis for the company’s growth.

Strategic investors including refiners have been considered potential buyers as the increasing number of companies are moving to equip with manufacturing and distribution capabilities of eco-friendly fuels amid growing interest in ESG management.

DK O&T imports soybeans and transforms them into cooking oil or recycle waste oil from households and restaurants into renewable energy.

The sale price of DK O&T is likely to be less than 300 billion won ($270 million). Hyundai Oilbank has cash and cash equivalents of 76 billion won at the end of last year, heightening the possibility of the refiner joining hands with a financial investor to finish the race.

A 100% stake in DK O&T, including a 70% stake owned by STIC Investments and a 19.72% stake owned by former CEO Kim Chang-yoon, will be sold. STIC Investments acquired 70% of the company for 94.5 billion won in June 2017.

The company recorded revenue of 331.4 billion won in 2020 on a consolidated basis, up 28% from a year ago. Its operating profit jumped 61.9% to 16.5 billion won and earnings before interest, taxes, depreciation and amortization (EBITDA) was 21.7 billion won.

The seller reportedly wants an enterprise value/EBITDA multiple of 17~18 times. DK O&T is likely to be sold to a strategic investor or a consortium of a strategic and financial investor rather than through a secondary deal due to the high price tag.

“Many potential buyers are showing interest in DK O&T among companies on the market,” said an industry source. “Narrowing the valuation gap is likely to be the key to closing the deal.”

"There is nothing in progress. It is not true that we have formed a consortium with a financial investor at this stage,” said an official at Hyundai Oilbank. (Reporting by Ar-rum Rho)