LG Chem mulls merger with LG Life Sciences
By Kim Tae-gyu
LG Chem is considering a merger with LG Life Sciences, LG Group officials said Tuesday.
LG Chem has cash reserves of 1.7 trillion won; while LG Life Sciences, a drug and cosmetics maker, has a market capitalization of about 1 trillion won.
“LG Chem is currently mulling over taking over LG Life Sciences to nurture a new growth engine,” an LG Group spokesman said, “but a final decision has yet to be made.”
Asked whether the two LG Group affiliates’ boards would discuss integration later this week, the spokesman refused to confirm this.
Market observers point out that the merger is about finding future cash cows.
“LG Group seems to be seeking next-generation growth engines through the merger,” said an analyst who asked not to be named.
“LG Chem’s financial strength and technical edge would provide momentum to LG Life Sciences, which also has an upside potential in the bio industry. LG Life Sciences lacks the funds to carry out intensive research.”
Group Chairman Koo Bon-moo has stressed the urgency to get a jump on promising new areas such as automotive components and renewable energy.
LG’s bigger rival Samsung has gone all-out to bet on the bio industry under the stewardship of Vice Chairman Lee Jae-yong. Samsung has spent more than 10 trillion won over the past five years on the sector.
LG Chem is regarded as one of the healthiest corporations in Korea thanks to its stable business portfolio. Recently, the Seoul-headquartered outfit chalked up a big success in the rechargeable battery segment.
Also, earlier this year, the company took over Dongbu Farm Hannong, the country’s biggest processor of agricultural materials including seeds and fertilizers, for 424.5 billion won.
The acquisition of LG Life Sciences would likely expand the chemical giant’s beat from petrochemical materials to agricultural and bio materials.
LG Life Sciences was spun off from LG Chem in 2002 but failed to make a major breakthrough in the country’s pharmaceutical industry ― its sales amounted to 450.5 billion won last year, less than half of market leader Hanmi Pharmaceutical’s 1.32 trillion won.