According to news sources, Korea's SK Group has officially participated in the bidding to acquire Beijing Tongyi, a Chinese lubricant business unit of Royal Dutch Shell.

Tongyi is China's No. 1 lubricant maker established in 2006 by Royal Dutch Shell by acquiring a 75-percent stake in Beijing Tongyi Petroleum Chemical Co. According to oil refining industry sources, on June 5, SK Lubricants, SK Group's lubricants unit, participated in the main bidding for Beijing Tongyi which was held on May 29.

Reportedly the lubricants unit had suffered financially since late last year due to lower oil prices and the parent company decided to dispose of the Chinese company as part of its restructuring effort.

Investment bankers had previously expected the deal would fetch about US$500 million, but now the price is estimated at over $620 million. An oil refining industry official commented, "The original date to announce the final winner was June 3 but it was delayed. It seems like Royal Dutch Shell is contacting bidders individually, which ended up raising the price level."

An investment banker explained, "Once successful in acquiring Tongyi, the winner will be able to emerge as the largest lubricant supplier in China overnight." Not only that, the winner may become one of the strongest contenders in the world's lubricant market.

SK Lubricants posted operating profit of 289.8 billion won (US$260 million) last year, up 86 percent from the previous year.