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THE INVESTOR
June 25, 2019
Big Reunion

Deals

Korean conglomerates to embark on more M&As this year

  • PUBLISHED :January 07, 2019 - 15:52
  • UPDATED :January 07, 2019 - 16:19
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[THE INVESTOR] This year is expected to observe a flurry of mergers and acquisitions by Korea’s conglomerates, and possibly even record-breaking mega-deals, according to industry watchers on Jan. 6.

Leading the trend will be SK Group which was actively engaged in M&As last year. Some notable deals include SK Holdings’ acquisition of AMPAC Fine Chemicals, a US-based contract manufacturer of active pharmaceutical ingredients, SK Hynix’s investment in Toshiba’s chip business and SK Telecom’s purchase of local security firm ADT Caps. 



With SK Group Chairman Chey Tae-won emphasizing the need to focus on global markets for new revenue sources, industry sources expect it to continue pursuing M&As. Once restructuring of the group by dividing it into two units -- investment unit and business unit led by SK Telecom -- is completed, the group will become free to seek more such deals.

Lotte Group, the country’s fifth-largest conglomerate, is expected to secure 2.5 trillion won (US$2.24 billion) by selling three subsidiaries -- Lotte Card, Lotte Capital and Lotte Insurance -- this year and is anticipated to scout for more acquisitions with the proceedings.

Lotte had unveiled a five-year investment plan of massive 50 trillion won through 2023 in October. Of this, 20 trillion won has been allocated for the construction and chemical sectors. Considering the long period for building facilities, experts predict that it might be more reasonable for Lotte Chemical to pursue M&A deals.

CJ Group was one of the leading conglomerates last year as it spurred efforts to achieve the goal of Great CJ Plan 2020, which aims to secure 100 trillion won in sales by and 70 percent of its sales from global markets.

Early last year, CJ CheilJedang sold CJ HealthCare to Korea Kolmar for 1.31 trillion won. With the proceedings, it acquired US food processor Schwan’s for US$1.84 billion in November, a record deal for the group. It is also reviewing taking over German logistics company Schnellecke. CJ ENM bought Eccho Rights, a film and television rights management and distribution company based in Sweden, in December. It is expected to seek more acquisitions after selling a partial stake in its subsidiary Studio Gragon.

Other big deals that market watchers are paying close attention to are the possible sale of Oriental Brewery and Nexon.

In Korea, the biggest M&A deal record is held by Samsung Group, which bought Harman for 9 trillion won in 2016. But this year might see record-breaking deals. The first candidate is Oriental Brewery which was sold to AB InBev in 2014 for 6 trillion won. The company’s union members think a possible sale of the company is highly likley.

An even stronger candidate for a record-breaking mega deal is game giant Nexon. Last week, the company’s founder Kim Jung-ju said he plans to sell a total of 98.64 percent stake held by him and related parties including his wife in its holding firm NXC. Combined with the management premium, Nexon’s deal is expected to exceed 10 trillion won.

By Park Ga-young (gypark@heraldcorp.com)

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