KCC Glass has been given the green light to finalize its merger with Korea Autoglass and is expected to seek further deals to strengthen its market position after being spun off from KCC Corp. earlier this year.
Shareholders of the South Korean company, which specializes in building glass products and interior designs, approved the merger at a special shareholder meeting on Thursday (October 29). The deal was announced in September and is expected to be completed by early December.
It could be the first of a string of mergers and acquisitions (M&As) involving KCC Glass, industry watchers said, as the company has shown interest in several smaller players since the split from KCC Corp. in January.
KCC Glass was in advanced talks to buy interior startup House Media earlier this year, but decided to withdraw. The company had also reportedly considered an investment in home decoration platform operator Zipdoc and the acquisition of LG Hausys’ auto materials business.
The strong financial position of KCC Glass supports its M&A ambitions, observers said. It has a net cash position of about 140 billion won, with cash and cash equivalents of 258.9 billion won and total borrowings of 110 billion won at the end of June.
“The combined entity after the merger will remain in a healthy financial position because Korea Autoglass also has strong liquidity with zero long-term borrowing,” an insider said. “In contrast, KCC Corp’s financial profile has deteriorated since the purchase of U.S.-based Momentive Performance Materials (MPM) last year, reducing its firepower for new acquisitions.”
KCC Corp acquired MPM for about $3 billion in May 2019 in partnership with private equity investors in a deal where it paid 45% of the acquisition cost. The total amount of borrowing on its balance sheet increased to 2.5 trillion won at the end of 2019, from 1.87 trillion won a year earlier. (Reporting by Byung-yoon Kim)