South Korea's resin sector has undergone a shake-up, following Seoul-based Hanwha Group's Nov. 26 announcement that it's buying plastics and chemicals assets from Samsung Group and becoming the country's largest petrochemicals maker.
Hanwha said it was buying a majority stake in Samsung General Chemicals and acquiring Samsung's share of the Samsung Total Petrochemicals joint venture with French chemicals firm Total SA. The deal will boost Hanwha's overall petrochemical sales to 18 trillion Korean won (US$15.8 billion), the company said.
It said the purchase is aimed at helping overcome softness in some of its existing business, boosting competitiveness with economies of scale and giving it “an opportunity to overcome the petrochemical recession in Asia.”
It also said the merger was done with an eye toward being more competitive against low-cost feedstocks from Middle East and shale gas in North America, by diversifying Hanwha's existing feedstocks to encompass naphtha, condensate and liquid petroleum gas.
“The product line will also be diversified from the existing products, ethylene derivatives, to polypropylene, para-xylene, and styrene monomer,” Hanwha said. “This allows the group to minimize risks caused by deteriorating competitiveness and profitability of some existing key products. As a result, a foundation has been established for stable revenue growth.”
Before the acquisition, Hanwha's chemicals unit made polyolefins, including low and high density polyethylene, ethylene vinyl acetate and PVC. The purchase also increases Hanwha's ethylene capacity to 2.91 million metric tons, making the world's ninth-largest ethylene maker.
Hanwha said it is buying a 57.6 percent stake in Samsung General Chemical. News reports, citing Samsung filings in Korea, said that it was paying 1.06 trillion Korean won ($886.3 million) for the business, as part of a 1.9 trillion won ($1.67 billion) total cost for the acquisitions.
The purchase also includes Samsung sizable arms-related businesses, and will make Hanwha into Korea's largest defense contractor and weapons maker, expanding the company from ammunition and precision-guided weapons into defense-related electronics.
Hanwha, which is one of Korea's 10 largest companies and a member of the Fortune 500, also said various Samsung units in the deal will enhance its business in factory automation and precision machine tools.