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M&As

Korea Inc 2021: Year of record M&As, tie-ups and spin-offs

Korea’s corporate sector has seen record deals as analysts forecast fever will continue into next year

By Dec 03, 2021 (Gmt+09:00)

M&As, tie-ups and spin-offs have been active as companies seek new growth drivers
M&As, tie-ups and spin-offs have been active as companies seek new growth drivers

South Korea’s corporate sector has seen record deals through mergers and acquisitions, tie-ups and spin-offs this year, as big companies and startups alike gear up for new business opportunities in the post-pandemic era.

The establishment of joint ventures, including those among domestic companies and cross-border transactions, reached 45 cases in the first nine months of the year, according to a tally by Market Insight, the capital market news outlet of The Korea Economic Daily.

The figure compares with 41 cases in the entire year of 2020 and 28 in 2019, the Market Insight calculation, based on data from five Korean law firms, showed.

The numbers represent business-to-business tie-ups, excluding investments from financial institutions for capital gains.

The number of corporate splits or spin-offs stood at 26 in the January-September period, compared with 24 in 2020 and 22 in 2019.

There were 43 M&A cases in the first nine months of this year, in contrast to 39 for 2020 and 30 for 2019.

“We’re receiving three to four inquiries on the establishment of joint ventures a day. Undoubtedly, we’re at a fever pitch. The fever over M&As, JVs and tie-ups will continue into next year,” said an attorney at a local law firm.

LG Energy and Stellantis agree to launch a battery JV
LG Energy and Stellantis agree to launch a battery JV

BATTERIES, RENEWABLES, ENTERTAINMENT AND NFTs

Corporate tie-ups have particularly been robust in the battery, renewable energy and entertainment content businesses as companies were seeking to gain the upper hand over rivals when the pandemic eases and the global economy recovers.

In October, Samsung SDI Co. said it is partnering with Dutch-domiciled multinational automaker Stellantis N.V. to build a multi-billion-dollar battery facility in the US, joining other Korean battery makers’ move to gain ground in one of the world’s largest electric vehicle markets.

The Samsung-Stellantis deal followed a series of tie-ups between battery producers and automakers.

LG Energy Solution Ltd., which launched Ultium Cells LLC, a JV with General Motors Co., in 2019, said in April of this year that they are building their second $2.4 billion battery cell plant in Tennessee in addition to their first $2.3 billion joint factory in Ohio.

SK Innovation Co., another Korean battery maker, and Ford Motor said in September that they officially kicked off joint venture BlueOvalSK, which plans to invest $11.4 billion to build an assembly and battery complex and two additional battery factories in the US.

“In the past, battery companies were often viewed as auxiliary suppliers to smartphone makers and other device manufacturers. But with the advent of the EV era, procuring batteries has become one of the top priorities for carmakers,” said an official at a local battery maker.

More recently, POSCO Chemical Co., a unit of steel giant POSCO, said on Tuesday it is forming a new JV with US top automaker General Motors Co. to produce cathode materials used in electric vehicle batteries.

SK acquired Power Plug to launch a fuel cell JV in January
SK acquired Power Plug to launch a fuel cell JV in January


SK GROUP, KEY PLAYER IN M&A MARKET

Among big conglomerates, SK Group has been a key player in the M&A market.

Earlier this year, SK signed a $1.5 billion deal to acquire a controlling stake in US hydrogen fuel cell maker Plug Power Inc., and in October they launched a JV to tap into the fast-growing fuel cell market in Asia.

SK Materials Co., the industrial gas manufacturing affiliate of SK Group, in mid-September joined hands with US startup Group14 Technologies Inc. to build a $726 million battery material plant in Korea.

“Speed is key to the successful launch of a new business, particularly in sectors such as tech and bio. Combining two companies with different corporate cultures into one could be time-consuming and counterproductive,” said an SK Group official. “Launching a joint venture is a good way of starting a new business with speed.”

Forming JVs between unlikely partners is another phenomenon in the corporate sector this year.

Dunamu Inc., the operator of Korea's top cryptocurrency exchange Upbit, has agreed to set up a JV with entertainment powerhouse HYBE Co., the label behind the boy band sensation BTS, to enter the non-fungible token (NFT) market.

Dunamu, which recently launched UPbit NFT, a domestic NFT exchange, said it aims to secure various items in the Korean entertainment industry to be tokenized.

POSCO Chemical and GM has agreed on a battery JV
POSCO Chemical and GM has agreed on a battery JV

SPIN-OFFS TO ENHANCE CORPORATE VALUE

Dividing a company into two separate entities has also been active as companies sought to enhance their corporate values through equity investment in other companies or initial public offerings (IPOs) of their new firms amid ample liquidity in the stock market.

SK Telecom Co. has completed the spin-off of its in-house investment arm as a separate entity, SK Square.

Last month, SK Square said it is buying a 35% stake in Korbit, one of Korea’s leading cryptocurrency exchange operators, for 90 billion won to expand its portfolio into next-generation platforms.

On Tuesday, Halla Group, the parent of auto parts maker Mando Corp., kicked off HL Klemove, combining its two self-driving-related business units, to foster its autonomous driving solution business.

Write to Jun-Ho Cha at chacha@hankyung.com

In-Soo Nam edited this article.
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