SKC to sell plastic film business to Hahn & Co. for $1.3 billion

SKC Ltd., the chemical materials unit of South Korea’s SK Group, is selling its plastic film business to private equity firm Hahn & Co. for 1.6 trillion won ($1.3 billion) to raise funds to expand its battery materials business.

SKC will hold a board meeting to approve the deal next week and sign a sale and purchase agreement with the Seoul-based private equity company, investment banking sources said on Thursday.

The sale of the chemical firm’s industrial materials division, which makes a polymer film, widely known as PET, is part of the conglomerate’s group-wide shift toward eco-friendly businesses such as electric vehicle batteries, battery materials and hydrogen production.

PET film, used in videotapes and LCD displays, has been SKC’s backbone over the past few decades, playing the role of cash cow for SK Group, Korea’s second-largest conglomerate.

Last year, SKC’s plastic material business posted 1.31 trillion won in revenue, accounting for more than a third of the company’s entire sales of 3.4 trillion won.

However, the group management has concluded that PET film is an unsustainable business given the strengthening of environmental, social and governance (ESG) standards across industries.

Hahn & Co., led by former Morgan Stanley banker Scott Sang-Won Hahn, is an active player in Korea’s mergers and acquisitions market, with more than $10 billion in assets under management.

COPPER FOIL, A GROWTH DRIVER

Proceeds of the sale will be used to expand the production of copper foil, a core material for electric vehicle batteries and semiconductor materials.

SK Group entered the copper foil market in 2019 when it acquired a foil-making business from global investment company KKR & Co., also known as Kohlberg Kravis Roberts & Co., for 1.2 trillion won. Later, SK launched the business as a separate entity, SK Nexilis Co., a wholly-owned subsidiary of SKC.

With competition heating up in the global race for EVs and other eco-friendly cars, Korea’s major companies are moving forward with their plans to expand facilities for raw materials used in EV batteries.

Global demand for copper foil, used to make anode materials in lithium-ion batteries, is forecast to more than triple to 1.59 million tons by 2025 from 450,000 tons in 2021, according to Korea’s HI Investment & Securities.

SK Nexilis is already the world’s largest copper foil maker with a global market share of 22% as of 2021, according to research firm SNE Research. China’s Londian Wason Holdings Co. is the No. 2 player with a 19% market share, followed by Taiwan’s Chang Chun Group (CCP) with a 18% share, and Korea’s Iljin Materials Co., which has a 13% market share.

Another Korean copper foil maker, Solus Advanced Materials Co., owned by SkyLake Investment Co., a Seoul-based PE firm, is also aggressively expanding its facilities in Korea and abroad.

TO WIDEN ITS LEAD OVER RIVALS

Industry watchers said SK Nexilis aims to further widen its lead over competitors by building more copper foil plants, particularly in overseas markets.

In Korea, the company is running six factories with a combined annual capacity of 50,000 tons.

SK said it plans to raise its total copper foil production capacity at Korean and overseas factories to 250,000 tons by 2025.

In July of last year, the company broke ground for its Malaysian plant with an annual capacity of 50,000 tons.

It is also set to break ground for a copper foil plant in Poland by the end of this month. The company plans to eventually double the Polish factory’s annual capacity from 50,000 tons to 100,000 tons to meet growing demand in Europe.

In the US, SK Nexilis is currently looking for a site to build a 50,000-ton plant by 2025.

The company is supplying copper foil to a number of global battery makers, including Korean companies such as SK On Co. and LG Energy Solution Ltd., the world’s No. 2 battery player.

Write to Chae-Yeon Kim and Jeong-Min Nam at Why29@hankyung.com
In-Soo Nam edited this article.