Interest brims over Korea¡¯s top bio oil maker Daekyung O&T amid ESG wave

The offering of a near 90 percent stake in Korean vegetable and animal oils producer Daekyung Oil & Transportation Co. is drawing heat among a wide range of companies racing to enhance green portfolio for environmental, social, and governance (ESG) mandate.

According to multiple sources from the investment bank industry on Tuesday, STIC Investments on Monday sent out information memorandum to offer its controlling stake in Daekyung O&T. Prospective investors including Korean refiners, food manufacturers, chemical companies, and private equity funds received the confidential document.

Up for grabs is entire outstanding shares in Daekyung O&T, including 70 percent owned by STIC Investments via fund, and 19.72 percent owned by former chief executive Kim Chang-yoon. The deal is estimated at minimum 500 billion won.

Sales advisor Bank of America plans to receive preliminary bids from potential buyers in five weeks.

Daekyung O&T – founded in 1995 – produces and sells oil and fat from animals and vegetables. They are widely used to produce food, medical items, and paint.

Daekyung O&T is top player in animal oil sector for feeds. It is also engaged in exports and imports of oil and fat, vegetable oil refining, animal oil and fat rendering, and recoverable oil production.

Under the ownership of STIC Investments since 2017, Daekyung O&T carried out business overhaul and transformed into an environmentally-friendly energy company amid growing emphasis on green sector.

The company focused on bio diesel sector that is considered an alternative to fossil diesel fuel. It began to produce reusable raw materials by refining slaughtered by-products and waste edible oil that were all thrown away in the past.

Daekyung O&T commands about 50 percent in Korea¡¯s bio diesel market.

Potential buyers are reviewing acquisition to enhance ESG portfolio in line with global trend. Companies at home and abroad are establishing long-term plans to reach carbon neutral goal, said an unnamed industry official, and demand for businesses Daekyung O&T are engaged in is projected to surge mid to long term.

According to Financial Supervisory Service data, last year, Daekyung O&T raised 16.5 billion won ($13.9 million) in operating income, up 300 percent from a year ago, on sales of 331.4 billion won, up 28 percent. Its cash flow also jumped 17 times from 1.5 billion won to 25.1 billion won over the same period.

Its earnings before interest, taxes, depreciation, and amortization (EBITDA) this year is estimated to reach 45 billion won.

Most of the oil refiners are interested in the sale, said another industry official who asked to be unnamed. STIC Investments has deemed it is the best time to cash out amid ESG emphasis.

[¨Ï Maeil Business Newspaper & mk.co.kr, All rights reserved]