LG Chem, a leading chemical company under the South Korean tech conglomerate LG Group, has started talks to sell off its water solutions unit to secure cash flow amid the group’s drive to streamline its businesses.
LG Chem has reportedly selected Glenwood Private Equity as a preferred bidder to acquire its water solutions business, which specializes in manufacturing reverse osmosis membranes, owning the world’s second-largest market share in the sector. The RO membranes desalinate seawater, and the recycled water is used for industrial purposes.
The unit’s valuation is expected to stand at around 1 trillion won ($695 million). In 2024, it posted 250 billion won in revenue, 65 billion won in earnings before interest, taxes, depreciation and amortization, or EBITDA.
Glenwood is an alternative investment firm headquartered in Seoul with cumulative assets under management of $3 billion. The PE has developed a close relationship with LG Chem, having acquired its diagnostics business, now renamed Invitros, in 2023.
“Glenwood has made its name here by specializing in corporate carve-out deals,” an official from a local private equity company commented. A carve-out deal refers to a situation where a parent company sells its business unit to an outside investor, making the unit a separate entity.
With the acquisition of the water solutions unit, the PE is expected to seek to boost synergy with its portfolio company Techcross Environmental Services. In 2024, Glenwood acquired the ballast water treatment system company, then-named HiEntech from Bubang Group. Before being acquired by Bubang Group, HiEntech was a sewage treatment operation owned by LG Electronics.
LG Chem’s water solutions unit was expected to be the chemical giant's key growth engine. In 2023, the company decided to invest 125 billion won in the RO membrane plant located in Cheongju, North Chungcheong Province, to double the water treatment business within five years.
Industry officials assume LG Chem may be trying to streamline its business and secure liquidity amid a challenging business landscape.
Last month, LG Chem Vice Chair and CEO Shin Hak-cheol pledged to accelerate growth in the company’s three key sectors: advanced materials, life sciences and sustainability.
“Within the three major growth engines, we will set priorities and enhance competitiveness through strategic selection and focus,” Shin said at the general meeting of shareholders held on March 24.
A few days after, LG Group Chairman Koo Kwang-mo shared a message on a similar note, urging the group's top executives to act with a "sense of urgency" and embrace change, similar to its conglomerate peer, SK Group’s restructuring drive.
"With a sense of urgency, we must break away from past inertia and the misalignment between strategy and execution,” Koo said at the conglomerate’s first executive meeting of the year held on March 27.
He also emphasized the importance of focus and prioritization, saying, “The reality is that we cannot do all businesses well, which is why we must focus and prioritize.”
silverstar@heraldcorp.com
