Hanwha General eying 2020 IPO; Samsung may cash in $800 mn stock

  • 2019-08-03

Hanwha General Chemical Co. Ltd. is aiming to list on the Korea Stock Exchange next year, which may lead to Samsung Group’s two arms disposing of remaining shares in the unit of South Korea’s Hanwha Group for about 1 trillion won ($833 million).

Hanwha General has recently held discussions with foreign securities companies about its initial public offering which is estimated at 5 trillion won and looks set to be the country’s largest floatation in 2020, according to investment banking sources on August 1.

It is now preparing to send requests for proposals to brokerage firms to select a lead manager.

The IPO has been on the table since Hanwha Group took over Samsung Group’s four units of chemical and defense businesses in 2015, including Hanwha General Chemical (previously Samsung General Chemical), in a 2 trillion won deal.

After the so-called big deal, Samsung C&T Corp. and Samsung SDI Co. Ltd. were left with a combined 24.1% stake in Hanwha General to ease the financial burden of Hanwha Group.

In return, Hanwha pledged to take Hanwha General public by 2021 with a one-year delay option.

The two Samsung units were also granted options to sell their shares back to Hanwha Group, in case the IPO plan is scrapped.

“Hanwha Group will go for the IPO of Hanwha General Chemical, immediately after completing the listing of Hanwha Systems on the Korea Stock Exchange within the year,” one of the sources told the Korean Investors.

Hanwha General is South Korea’s biggest producer of terephthalic acid (PTA), a primary component in many types of polyester. It controls energy and other chemical companies of the parent group.

WHERE TO SPEND IPO PROCEEDS

Last year Samsung Group were in exclusive negotiations with the US private equity group Bain Capital to dispose of shares in Hanwha General.

Bain Capital had offered about 1 trillion won for the 24.1% stake. But Samsung walked away from the talks at the last minute for an unknown reason.

If the IPO goes ahead, market speculation is that Samsung C&T, the de-facto holding firm of the conglomerate, may use the proceeds to buy additional shares in Samsung Life Insurance Co. Ltd. to bolster the group’s ownership structure.

Samsung C&T holds 20.05% of Hanwha General.

Otherwise, it could spend the IPO proceeds in new investment, along with battery maker Samsung SDI which owns 4.05% in the Hanwha unit.

For the affiliates of Hanwha General, the IPO will give them a chance to shed part of shares in the chemical company. Hanwha Energy Corp. and Hanwha Chemical Co. Ltd. own 39% and 36% in Hanwha General, respectively.

Since the acquisition by Hanwha Group in 2015, the general chemical firm has improved corporate value.

Its EBITDA is forecast at 500 billion won in 2019, up from last year’s number in the mid-400 billion won and nearly doubling from 265.6 billion won in 2015.

By Gowoon Yi and Hugh YH Jeong

ccat@hankyung.com

<Edited by Yeonhee Kim>

(Photo: Getty Images Bank)