SKC in Korea is Negotiating the Sale of SK Pucore, a Polyol Business, to a Private Equity Firm

Korea: To focus on chips and secondary battery materials, SKC Corp., a South Korean producer of Polyethylene Terephthalate (PET) film, will sell its Polyol subsidiary SK pucore Co. to a private equity group. SK Pycore is now being discussed for sale by SKC to Glenwood Private Equity for a price of roughly 500 billion won ($390 million).

After doing due diligence, the two businesses are anticipated to execute a contract soon after their recent memorandum of agreement. Samil PricewaterhouseCoopers is renowned for leading the sales as the buyer's financial consultant. Earnings before interest, taxes, depreciation, and amortisation (EBITDA), which totaled 48.8 billion won last year, are likely to be valued at about ten times that in the deal. A joint venture between SKC and Mitsui Chemicals Inc. of Japan, SK pucore, formerly known as MCNS, manufactures Polyols, a key component of Polyurethane.

The two businesses just agreed to a memorandum of understanding, and following due diligence, they intend to execute a contract. The deal's estimated worth is projected to be around 10 times the previous year's earnings before interest, taxes, depreciation, and amortisation (EBITDA), which were 48.8 billion won. Polyols, a key component of Polyurethane, are produced by SK pucore, formerly known as MCNS, a joint venture between SKC and Japan's Mitsui Chemicals Inc.

The company changed its name after the cooperation with Mitsui Chemicals expired in 2021. The domestic Polyol market is dominated by SK Pucore. It represented 40% of the market overall last year. With the sale, SKC hopes to build up capital for investments and strengthen its financial position. SKC declared plans to invest 1.8 trillion won to increase its ability to produce secondary battery materials and semiconductors.

Additionally, SKC is in the process of purchasing ISC Co., a company that tests semiconductors, for around 400 billion won. SKC's net debt to EBITDA increased from 3.5 times in 2021 to over 6 times in the first quarter of this year.

In the first quarter, the company's net debt totaled 3.6 trillion won. A mid-sized Korean private equity fund manager is Glenwood PE. In addition to being the second-largest stakeholder of Hanwha Advanced Materials Corp. and CJ Olive Young Corp., it recently bought the diagnostics section of LG Chem Ltd. In particular, Glenwood PE oversees PI Advanced Materials Co., which it earlier purchased from SKC. Synergies should result from the most recent agreement. Automotive, fashion, electronics, and medical devices are just a few of the downstream industries that use Polyols, the company's signature commodity, to produce Polyurethanes. The business comprises production facilities in five different countries, more than 450 clients, and more than 130 distribution partners.

On sales of 720.6 billion won, SK Pucore generated an operating profit of 32.4 billion won. By creating eco-friendly Polyol goods recently, the corporation has ensured future growth engines. Customers give SK Pucore their used Polyols, which are then recycled into new Polyols and sent back to the customers.

Additionally, the business is stepping up the production of bio-Polyols made from vegetable oils. The investment banking sector is watching to see if SKC will keep acquiring more assets to create a portfolio that is focused on emerging firms. According to SKC Chief Executive Officer Park Won-cheol in March, we want to increase the proportion of high-value-added products in our semiconductor and chemical businesses to increase the competitiveness of our core industries this year. We will also extend our worldwide copper foil sales and expansion. With active new mergers and acquisitions, we will grow new growth enterprises.

Additionally, the business last year sold its film branch to private equity group Hahn & group for 1.6 trillion won. However, given how uncertain the M&A market is right now, several detractors express concern regarding SKC's sales. An industry insider stated, we are concerned that the company is selling assets in a hurry when the buyer has more clout. Although the company is in a critical need of cash, it should also be considered that doing so would give the market an unwarranted indication that SKC's financial status is precarious.