SK Networks, South Korea’s third-largest car rental provider, is rising as a possible buyer of AJ Rent-a-car, the country’s No. 2 car rental company, local reports said Tuesday.

Since last September, there have been speculations that AJ Networks -- a local construction device and IT equipment rental provider -- might sell 45.38 percent of shares in its rental service unit.

“It is highly likely that that the proceeds from the LPG business disposal will be earmarked for rental car business acquisition efforts. We believe that SK Networks will be able to generate significant synergies with AJ Rent-a-Car,” said Rhee Jae-kwang, an analyst at Mirae Asset Securities.

SK Networks revealed its decision last week to sell its liquefied petroleum gas business and LPG filling stations to SK Gas and Pine Street Asset Management for 310 billion won ($270 million).

Related companies, such as Korea’s top two automakers Hyundai and Kia Motors, are eyeing a stake in the growing car rental market, as more drivers here are choosing to rent cars rather than purchase one due to decreased purchasing power.

Cars registered for rental services tallied at 623,988 units in 2016, a more than twofold increase from 280,000 units in 2011, said the Korea Rental Car Association.

AJ Rent-a-car has been losing ground amid fierce competition against rivals run by major conglomerates. It is the second-biggest car rental company here, with 11.46 percent of market share, as of last September, followed by SK Networks, which has 10.44 percent of market share, according to data from the KRCA.

Market leader Lotte Rental has 25.34 percent of market share.

AJ Rent-a-car also saw its operating profit drop 20 percent on-year to 32.7 billion won in 2016, the KRCA said.

Rhee said that restructuring efforts at SK Networks are ongoing and added that the acquisition of local home appliance vendor Tongyang Magic -- which has changed its name to SK Magic -- and disposal of its fashion business would not be the company’s final moves.

“We think the disposal of the LPG business has more to do with funding future M&A deals than enhancing financial soundness,” Rhee said.

A spokesperson for AJ Rent-a-car denied reports of the sale when approached for confirmation. 

By Kim Bo-gyung (lisakim425@heraldcorp.com)