SK Chemicals to sell pharmaceutical unit to Glenwood PE

SK Chemicals Co., a South Korean plastic materials producer, is in exclusive talks with Seoul-based Glenwood Private Equity to sell its pharmaceutical division for around 600 billion won ($450 million) by the end of this year, according to people with knowledge of the matter on Thursday.

The two sides recently signed a memorandum of understanding on the proposed deal, which excludes the vaccine manufacturing business.

Glenwood PE is carrying out due diligence on SK’s pharmaceutical operations to close the deal by the end of this year.

SK will use the proceeds from the sale to expand its eco-friendly and biomaterials production, including plastic recycling, one of its growth pillars.

Its business is comprised of green chemical materials and life science products. The green chemical division produces eco-friendly materials.

Its life science division manufactures pharmaceutical products, including vaccines. Arthritis treatments and supplements to improve blood circulation are its flagship products.

However, the life science division underperformed other SK Chemicals’ businesses, accounting for 17% of its revenue of 313.9 billion won in 2022.

For Glenwood PE, the pharmaceutical business will provide a boost to its healthcare portfolio after it acquired LG Chem Ltd.'s in vitro diagnostic business earlier this year.

With the LG deal, the private equity house has diversified its portfolio into the healthcare sector, which tends to generate a steady stream of cash flow.

Glenwood PE specializes in carve-out deals, or taking over business divisions from large companies and then improving their value before divestment. 

After selling the pharmaceutical division, SK Chemicals will accelerate its transition into an eco-friendly materials company. It plans to invest 1.2 trillion won in eco-friendly material and biomaterials businesses by 2025.

SK Chemicals is the world’s No. 2 copolyester producer after the US-based Eastman Chemical Co. Copolyester is a highly transparent plastic material mainly used in cosmetic containers. 

SK is aiming for the top spot in the copolyester market by expanding the material’s production capacity to 300,000 tons by 2025 and then 450,000 tons by 2030.

The global plastic recycling market was estimated at 60 trillion won in 2022, according to Samil PwC, a consulting firm. Its market size is expected to snowball by tenfold to 600 trillion won by 2050, growing at an average of 7.4% a year due to stricter environmental regulations.

The European Union has ruled that recycled content must make up more than 50% of total plastic packaging there by 2025.

Shares in SK Chemicals closed down 2.28% at 60,100 won on Thursday, with a market capitalization of 1 trillion won.

Write to Chae-Yeon Kim and Hyung-Kyu Kim at Why29@hankyung.com
 

Yeonhee Kim edited this article.