DL Chem raises $1.8 bn for US leveraged buyout

DL Chemical Co. became the first South Korean company to acquire a US-listed company in a leveraged buyout.

The Korean petrochemical company said on Tuesday it has secured $1.8 billion in loans both from domestic and overseas institutions to finance its $2.5 billion acquisition of Texas-based specialty chemical manufacturer Kraton Corp. 

This September, the company, formerly known as Daelim Industrial Co., signed a definitive agreement to buy 100% of the US-listed company in an all-cash deal.

For the leveraged buyout, the unit of South Korea's 18th-largest conglomerate raised $950 million in acquisition financing from overseas institutional investors. During roadshows last month, they expressed their intention to lend more than four times as much as DL Chemical needed for the cross-border deal.

At home, the world's largest producer of polybutene (PB) borrowed an additional $850 million both from the Korea Development Bank (KDB) and the Export-Import Bank of Korea, which charge lower rates than commercial lenders. 

To cover the remainder of the acquisition cost, the company will use its cash reserves of 1.2 trillion won ($1 billion). The price tag includes $900 million in liabilities held by Kraton, so the acquisition will lower its debt-to-equity ratio. 

Last year, KDB also provided loans to finance DL Chemical's $530 million acquisition of Singapore-based Cariflex from Kraton, which marked DL's first cross-border deal. Cariflex produces specialty synthetic rubber and latex used for medical materials such as surgical gloves and rubber stoppers.

 
Aiming to become one of the world's top 20 chemicals companies, DL Chemical is transforming into a manufacturer of high-value specialty chemicals such as construction and electronic chemicals. 

Kraton is the No. 1 provider of styrenic block copolymers (SBCs) in the US and Europe. SBC is regarded as an advanced material for use in adhesives and power cables for 5G wireless connection, as well as car interior materials.

Kraton is also the largest global provider of pine-based specialty products used for adhesives and road paving and tire materials. The former polymer business division of Shell Chemical Co. was sold to a US private equity firm in 2000 and then listed on the New York Stock Exchange in 2009.

The $2.5 billion deal won approval from Kraton's shareholders at an extraordinary gathering on Dec. 9., after getting the nod from US regulators, according to Yonhap news in South Korea. It is still pending regulatory approval from other major export markets, which the South Korean company expects to win by the end of February 2022.

Write to Jeong-min Nam at peux@hankyung.com
Yeonhee Kim edited this article.