LG Chem, the petrochemicals and battery-making unit of LG Group, is seeking more mergers and acquisitions (M&A) professionals, prompting speculation that it may become more active in the takeovers market after spinning off its battery unit.
Recruited professionals will be responsible for building the company’s M&A strategies and action plans, and will review the validity of joint venture and M&A deals, analyze target companies and risks, estimate possible synergies, and build deal structures.
A strict criteria has been applied, with eligible applicants needing more than five years of experience at global investment banks or seven years at accounting firms.
LG Chem has carried out several M&A deals in the past few years, but none attracted much attention. Its most recent notable deal was the acquisition of Farm Hannong, which the company bought for 424.5 billion won in 2016.
Since then, the firm has purchased U.S. automotive adhesive specialist Uniseal for a price reportedly exceeding 100 billion won, and U.S. chemical company DuPont’s technical assets for soluble organic light-emitting diodes for a price estimated to be over 300 billion won. It also took over a plant in Poland for 37.4 billion won.
LG Chem participated in a deal to acquire Germany-based Solvay’s engineering plastics business in 2019, but pulled out at the last minute.
The company has taken a conservative stance in making M&A deals because chief executive Shin Hak-chul is from 3M, a firm which has used innovative technology as the basis for its growth instead of M&As.
But with LG Chem having spun off its battery unit few months ago, it is expected that the trajectory will be changed this year. Market observers are watching whether the company will acquire firms with strong growth potential in the life sciences sector.
LG Group, which is South Korea’s fourth largest conglomerate, has been transformed since Koo Kwang-mo took over as chairman, and this is likely to help LG Chem become an active player in M&A deals.
LG Chem has a relatively small amount of cash compared to its size, as it handed 1.8 trillion won, nearly 80% of its total cash and cash equivalents, to wholly-owned subsidiary LG Energy Solution after its launch last year.
However, thanks to its booming petrochemicals business, the firm is not short of cash. The petrochemicals division recorded an operating profit of nearly 1.4 trillion won in the first nine months of 2020, accounting for 83.3% of its total operating profit.
LG Chem has said it plans to issue corporate bonds worth about 500 billion won in February and the amount is expected to be increased.
“LG Chem is strengthening its growth base by discovering and nurturing new growth engines in an attempt to become a global top five chemical company with a balanced portfolio,” said an industry source. (Reporting by Eun-ah Cho)