Korean firms rush to sell real estate to raise cash

South Korean companies are selling real estate and subsidiaries to raise cash as accelerating inflation, rising interest rates and the soft won all point to an economic downturn.

Lotte Chemical Co., a chemical materials producer, is in talks to sell its entire 75.0% stake in Pakistan subsidiary Lotte Chemical Pakistan Ltd. (LCPL) to Novatex Ltd., a Pakistan-based manufacturer of PET resin and films, according to a Lotte official on Monday.

“We are considering selling it for our management efficiency,” he told Market Insight, the capital market news provider of The Korea Economic Daily.

Based on LCPL’s market value of 209 billion won ($160 million), Lotte Chemical may walk away with 180 billion-200 billion won from the stake sale, including a management premium. The estimated price tag is 12 to 14 times the 14.7 billion won acquisition price Lotte paid in 2009.

SK GROUP

SK Group, South Korea’s No. 2 conglomerate, is working on selling its non-core assets.

Last month, SK Gas Ltd., a liquefied petroleum gas supplier, announced the sale of its 36.49% stake in an operator of the Eurasia Tunnel, a sub-sea road tunnel in Istanbul.

It sold the stake to an affiliate of Qatar’s sovereign wealth fund for 143 billion won to improve its financial health and secure money for future growth, the company said.

In the same month, SK Telesys Co., a unit of chemical products company SKC Ltd. sold its R&D center in Pangyo, the so-called Silicon Valley of South Korea, for 82 billion won.

SK Telesys, a telecom equipment supplier, also agreed to sell a 28.4% stake in NanoenTek Inc., an R&D and life-science lab equipment manufacturer, to a Seoul-based private equity firm for 58 billion won in September.

At the end of 2021, SK Telesys fell into negative equity capital of 38.6 billion won.

SIT Co., an automation systems manufacturer of Hanhwa Group, agreed to sell four office buildings in Jongno-gu, central Seoul for a combined 25 billion won in October.

Doosan Enerbility Co., a leading power plant builder, recently decided to unload its entire stake in Doosan Mecatec Co., an industrial heating system producer, to a domestic consortium for 105 billion won.

FROM CJ GROUP TO SMALLER MANUFACTURERS

CJ ENM Co., the country's top entertainment company, is understood to have sold Swedish broadcast distributor Eccho Rights to a German company for an undisclosed sum. CJ acquired Eccho for 9.5 billion won in 2018.

The buyer is identified as German investment and co-production outfit Night Train Media, Variety reported last week.

CJ Telenix Co., a telemarketing firm, recently agreed to sell a Seoul office building to a small-sized Korean IT company for 9.3 billion won to shore up its financial conditions.

Small-sized firms have joined the conglomerates in shedding non-core assets.

Last month, Kwangjin Ind., a toilet paper company, sold a plant and nearby land for 91 billion won to a domestic property developer. In the same month, STX Heavy Industries Co., a ship engine manufacturer, sold a domestic plant to a small-sized firm for 40 billion won.

Write to Ik-Hwan Kim at lovepen@hankyung.com
Yeonhee Kim edited this article.