Hyosung TNC mulls takeover of chemical affiliate’s specialty gas unit

Hyosung TNC Corp., the world’s top spandex maker, is considering taking over the specialty gas business of its chemical affiliate, news of which pushed its share price to a near four-year low.

Hyosung TNC said on Friday it has received a letter of intent for acquisition of the gas division from Hyosung Chemical Corp. and is reviewing it in a regulatory filing.

This came after Hyosung Chemical failed to sell the business to South Korean private equity firms IMM Private Equity and STIC Investments Inc. The PE consortium wanted to buy it for a much lower price than the seller’s target of 1.3 trillion won ($927 million),in view of its sluggish business.

After the announcement, Hyosung TNC’s share price tumbled 20.6% to 213,500 won, its lowest since January 2021. Hyosung Chemical's stock ended up 1.8% at 31,350 won, far outperforming the overall 0.8% gain in the benchmark Kospi.

Investors were concerned that Hyosung TNC may have to take over the gas division at higher costs than market levels, industry sources said.

DEBT-RIDDEN HYOSUNG CHEMICAL

IMM and STIC were known to have offered about 800 billion won to acquire the specialty gas unit, The low-priced offer reflected the division's ills stemming from the sluggish semiconductor business of its top customer Samsung Electronics Co., according to investment banking industry sources.

Hyosung Chemical’s specialty gas division generated 75.9% of its sales from Samsung, the world’s No. 1 memory chipmaker, which is struggling to catch up with its smaller crosstown rival SK Hynix Inc. in the market of advanced chips such as high-bandwidth memory (HBM).

Hyosung Chemical reported an operating loss of 111.7 billion won in the first three quarters of this year as the division suffered from Samsung’s sluggish business.

Hyosung Chemical has been scrambling to increase liquidity due to mounting debt, with 1.4 trillion won in current liabilities, short-term financial obligations that are due within one year or within a normal operating cycle.

The company had planned to repay some of the debt through the anticipated proceeds from the sale of the specialty gas division and borrowings from financial institutions.

Hyosung Group is considering transferring the specialty gas business to Hyosung TNC to save the chemical affiliate, investment banking industry sources said. The Korean textile-to-chemicals conglomerate may want to keep the division – the country’s second-largest specialty gas producer – within the group to take advantage of an eventual chip industry recovery, the sources added.

As of the end of the third quarter, Hyosung TNC has some 2 trillion won in current assets that the company can quickly convert to cash.

Write to Jun-Ho Cha at chacha@hankyung.com
 
Jongwoo Cheon edited this article.