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Samsung continues drive to streamline businesses

Lotte chairman Shin shows off M&A power amid internal feud

Samsung Group has decided to sell its affiliate’s stake in chemical units to Lotte Chemical, an apparent move to focus on its flagship businesses including information technology and electronics.

In separate regulatory filings on Friday, the group’s affiliates -- including Samsung Electronics, Samsung SDI, Samsung C&T, Samsung Electro-Mechanics and Hotel Shilla -- said they would sell off their entire stake, totaling 31.5 percent and valued at 470 billion won ($412 million), in Samsung Fine Chemical.

(Yonhap)
(Yonhap)
Samsung Fine Chemical’s 49 percent stake in Samsung BP Chemical will also be handed over to the Lotte affiliate. Malaysia-based chemical firm BP Chemicals holds a 51 percent stake in the joint venture. 

“The stock disposal will be put to a vote at an extraordinary shareholders meeting which will likely take place earlier next year,” a Samsung SDI spokesperson said.

The shareholders of other Samsung affiliates are expected to vote on the sell-off deal early next year.

Battery maker Samsung SDI also said in a press release it would sell its 90-percent stake in its chemical business unit to Lotte Chemical on Friday. 

The deal between Samsung SDI and Lotte Chemical, which is worth around 2.6 trillion won, is expected to be completed in the first half of next year. The Samsung affiliate will first spin off its chemical business in February 2016 and sell the remaining 10-percent stake by 2018, according to the battery business of Samsung Group.

The sell-off is in line with Samsung SDI’s efforts to further grow its battery and electric materials businesses, the company explained.

The chemical business of Samsung SDI earned 2 trillion won in sales in the July-September period this year, up 8.3 percent from the previous quarter, with its operating profit standing at 18 billion won. 

Utilizing the proceeds from its latest sell-off deal, Samsung SDI plans to invest 2 trillion won in its battery business over the next five years to become the world’s top electric vehicle battery maker, the company said. 

The latest package deal to sell off Samsung’s chemical businesses is seen as Samsung heir apparent Lee Jae-yong’s initiative to streamline the bloated businesses of the Korean conglomerate and improve the financial structure.

Lee reportedly had a meeting with Lotte Korea chairman Shin Dong-bin to finalize the deals.

Samsung Group sold its petrochemical businesses Samsung Total Petrochemicals and Samsung General Chemicals, and its arms businesses Samsung Techwin and Samsung Thales in November last year.

The huge deal between two of the largest conglomerates in Korea received a mixed market response. 

A market analyst was skeptical about Lotte’s planned acquisition, saying that “the takeover deal will diversify the business portfolio of Lotte Chemical, whose main businesses including those in polyester and polyethylene face tough challenges ahead due to heated competition.”

Lee Choong-jae, an analyst from KTB Investment and Securities, said that “the total takeover cost which is expected to be around 3 trillion won could become a financial burden on Lotte.”

Lotte Group is struggling with an internal family feud over control of the conglomerate.

By Kim Young-won (wone0102@heraldcorp.com)

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