LG Chem said in a regulatory filing on Friday that it was considering acquiring Woongjin Chemical, but that the details were yet to be finalized.
Although the two companies’ business areas do not overlap, taking over Woongjin Chemical, which has strength in water treatment filters, polyester and electronic materials, would create synergy as LG Group pushes ahead in the water treatment business, according to industry watchers.
Other contenders for Woongjin Chemical include Toray Advanced Materials Korea, Huvis, GS Group, Hyosung Group, Cheil Industries, and TK Chemical, a Samra Midas affiliate. Toray Advanced Materials and Huvis have already made their bids official by selecting principal underwriters for the deal.
About 56 percent of Woongjin ― a 46.3 percent stake held by Woongjin Holdings and 9.91 percent held by chairman Yoon Seok-keum’s children ― will be up for sale.
Debt-ridden Woongjin Holdings and Kukdong Engineering & Construction, two key companies of Woongjin Group, went into court receivership last year.
Established originally in 1972 as Cheil Synthetics, Woongjin Chemical became a Saehan Group company in 1997 before becoming a member of Woongjin Group in 2008. Woongjin Chemical produces synthetic fibers such as polyester and membrane filters for water purifiers. The company’s sales last year stood at 1.1 trillion won ($975.7 million) with an operating profit of 28.5 billion won.
Woongjin Chemical’s first-quarter operating profit, however, tumbled 60.8 percent on-year to 3.23 billion won, portending declines in its valuation.
The company’s second-quarter earnings are unlikely to pick up either due to low demand and strong raw material prices, according to analysts.
The market expects Woongjin Chemical’s price to be set at around 250 billion won.
Earlier this week, Korea Investment & Securities and Woori Investment & Securities, which are managing the sale of Woongjin, sent out teaser letters to over 50 potential bidders.
Woongjin Chemical shares surged 5.37 percent in 10 minutes after the market opened Friday upon expectations of a takeover, and closed at 9,750 won, up 2.74 percent from a day earlier.
By Kim So-hyun (firstname.lastname@example.org)