Based on the earnings of SK Networks’ gas station business last year, it may appear to be an unattractive deal to buy it for as much as 1.5 trillion won ($1.29 billion).
The business unit only made 20 billion won in operating profit last year with sales of 1.4 trillion won. GS Caltex, the largest player, has opted out of the deal saying that it did not see much economic feasibility.
It is true that the energy distribution business is not exactly expanding, with the number of gas stations having fallen from 13,107 at the end of 2010 to 11,500 now, according to data of the Korea National Oil Corp.
Then what did the consortium of Hyundai Oilbank and Koramco REITs and Trust, selected as the preferred bidder for the deal last week, see in the deal?
According to analysts, for third-largest Hyundai Oilbank, this is an opportunity to dethrone GS Caltex and become the second-biggest oil station following SK Energy. Hyundai Oilbank will add 320 gas stations to its 2,218 stations across the country. It can also boost its presence in the metropolitan area.
In Seoul, Hyundai Oilbank operates 45 stations. SK Networks has 49 in Seoul and 101 in Gyeonggi Province. This would compare with SK Energy’s 3,404 stations around the country including 94 in Seoul, 2,387 of GS Caltex and S-Oil’s 2,099.
Hyundai Oilbank is also expected to secure more sales of light oil products at the newly acquired gas stations.
For Koramco, the country’s third-biggest realty trust, it can increase the value of property assets of SK Network’s gas stations, many of which are located in prime locations. Koramco is reportedly planning to increase the value of properties by adding convenient facilities and introduce a gas station assets-backed REITs offering, analysts noted.
The prime locations of SK Network’s gas stations are also anticipated to help Hyundai Oilbank’s new businesses such as charging stations for new energy vehicles and delivery pick-up locations.
The deal is expected to be sealed by early next year.
By Park Ga-young (firstname.lastname@example.org)