Hyosung TNC Corp., the world’s top spandex maker, is considering taking over the specialty gas business of its chemical affiliate, sending its share price to a near four-year low.
Hyosung TNC said on Friday it has received a letter of intent for acquisition of the gas division from Hyosung Chemical Corp. and is reviewing it in a regulatory filing.
That came after Hyosung Chemical failed to sell the business to South Korean private equity firms – IMM Private Equity and STIC Investments Inc. – as the consortium wanted to buy it for much lower prices, given its sluggish business than the seller’s target of 1.3 trillion won ($927 million).
After the announcement, Hyosung TNC’s share price tumbled 20.6% to 213,500 won, the lowest since January 2021, while Hyosung Chemical’s stock ended up 1.8% at 31,350 won, far outpeforming a 0.8% gain in the benchmark Kospi.
Investors were concerned that Hyosung TNC may have to take over the gas division at higher costs than market levels, industry sources said.
DEBT-RIDDEN HYOSUNG CHEMICAL
IMM and STIC were known to have offered around 800 billion won to acquire the specialty gas unit as the division suffered from the sluggish semiconductor business of its top customer Samsung Electronics Co., according to investment banking industry sources.
Hyosung Chemical’s specialty gas division generated 75.9% of its sales from the world’s No. 1 memory chipmaker, which is struggling to catch up with its smaller rival SK Hynix Inc. in the market of advanced chips such as high-bandwidth memory (HBM).
Hyosung Chemical reported an operating loss of 111.7 billion won in the first three quarters of this year as the division stayed under pressure from Samsung’s sluggish business.
Hyosung Chemical has been scrambling to increase liquidity due to mounting debts with 1.4 trillion won of current liabilities, short-term financial obligations that are due within one year or within a normal operating cycle.
The company had planned to repay some of the debts through the expected proceeds from the specialty gas division sale and borrowings from financial institutions.
Hyosung Group is considering transferring the specialty gas business to Hyosung TNC to save the chemical affiliate, investment banking industry sources said. The South Korean textile-to-chemicals conglomerate may want to keep the division, the country’s second-largest specialty gas producer, within the group to take advantage of an eventual recovery of the chip industry, the sources added.
Hyosung TNC has some 2 trillion won in current assets that the company can quickly convert to cash as of the end of the third quarter.
By Jun-Ho Cha
chacha@hankyung.com
Jongwoo Cheon edited this article.
