Samsung SDI plans to acquire Cheil

Lee Kun-Hee, chairman of Samsung Electronics, his wife Ms. Hong

Samsung SDI, the battery making unit of Samsung group, will acquire electronics materials affiliate Cheil Industries, the company said Monday.

“SDI plans to acquire Cheil by offering Cheil shareholders 0.44 SDI share for each Cheil share,” SDI and Cheil said in a joint statement, early Monday.

The plan is subject to the approval of sides’ shareholders on May 20. Completion of the acquisition will be done on July 1.

Acquisition plan subject to approval on May 20

SDI spokesman Seo Hae-su said that the merger came as the company was desperate to strengthen its competitiveness in electronic materials in order to transform the company into a global top energy-focused firm.

“Cheil Industries has been consistent in investing materials to be used in energy and automotive solutions as well as those for displays and semiconductors. The acquisition plan is a win-win strategy. SDI will internalize battery-related materials techs owned by Cheil,” Cheil Industries CEO Cho Nam-sung said.

With the acquisition, Cheil Industries will become history.

Cheil, a symbol for Samsung, started in the textile and fashion industry before selling that business to its unlisted affiliate Samsung Everland for 1.05 trillion won late last year, to focus on electronics materials and chemicals.

The late Samsung founder Lee Byung-chull founded Cheil on Sept. 1954.

While Cheil had been impressing investors in the last decades thanks to healthy demand for fashion and chemical products, it has recently been losing its luster as the unit was late to respond to challenging market situations, according to officials at Samsung Group.

Cheil reported 9.3 billion won in operating losses during the fourth quarter of last year hit by worsening performance in its electronics materials and chemical businesses, pushing it back to review its 1.8 trillion won investment plan by 2016 with a “zero-base,” said Cheil officials.

SDI, established in 1970, rose to become the global top supplier in small-sized rechargeable batteries in 2002. Since then, it has been expanding its territories for large-sized batteries for electric vehicles and energy storage solutions.

Samsung officials said the acquisition was aimed at speeding up power succession to third-generation represented by Samsung chairman Lee Kun-hee’s son Jay-yong, oldest daughter Boo-jin and youngest daughter Seo-hyun.

Samsung recently handed over Cheil’s fashion unit to Seo-hyun, while the merged SDI-Cheil unit will be controlled by Jay-yong, according to Samsung officials.

“Simply put, Jay-yong will oversee the group’s electronics and finance businesses, while Boo-jin, who is also the president of Hotel Shilla, will manage hotel, heavy industries, chemicals and construction. The youngest daughter Seo-hyun will handle media and fashion businesses,” said another Samsung official.

Samsung Electronics is the biggest shareholder of SDI with 20 percent share, while the National Pension Service is the biggest shareholder of Cheil Industries with 11.63 percent, followed by Samsung Card with 7 percent. Official sources say Samsung Electronics’ portion to the merged SDI will rise to 11 percent.

Lee Kun-Hee, 72, chairman of the group’s crown jewel Samsung Electronics, has in recent years promoted his children to top positions and shuffled affiliates.

Some say the decision also helps strengthen the competiveness of Samsung Electronics as Samsung’s most crucial affiliate will be pushing its materials business via vertical integration.

“Samsung Electronics is pressurized to find a new revenue source amid stalling growth in smartphones,” said the Samsung official.

Morgan Stanley said SDI’s plan to acquire Cheil will have a “minor impact” on SDI shares as it believes the acquisition was in the process of raising Samsung’s stakes in Cheil Industries in management.

Samsung has made a flurry of restructuring moves in recent years.

Last year, unlisted display producer Samsung Display sold its stake in a glass venture to Corning and unlisted IT services company Samsung SDS bought network equipment provider Samsung SNS. By Kim yoo-chul, The Korea Times