The Secret Behind Raising 3 Trillion Won Needed for M&A in Just Two and a Half Months

DL Chemical Secures Funding through Asset Collateral and Policy Financing with US Crayton

Styrene Block Copolymer (SBC) plant of Crayton in Belfrey, Ohio, USA

[Asia Economy Reporter Choi Dae-yeol] DL Chemical announced on the 21st that it has secured the full 3 trillion won needed for the acquisition of the American petrochemical company Crayton, finalized in late September.

The company stated that after raising $950 million (approximately 1.12 trillion won) in overseas financial markets last month, it signed a financial agreement worth $850 million (about 1 trillion won) yesterday with the Korea Development Bank and the Export-Import Bank of Korea. Including its own cash reserves, the company said it has raised the full 3 trillion won acquisition amount.

What stands out is that this is the first time in Korea that a U.S.-listed company has been acquired through a leveraged buyout (LBO). An LBO is a method of acquiring 100% equity by securing loans from financial institutions using the assets of the target company as collateral to finance the acquisition. It is common to bear high interest rates to maximize collateral loans from the target company.

However, this time, by combining acquisition financing secured through domestic policy financial institutions, the company lowered both the financial costs and Crayton’s debt ratio. The company said, "We introduced an advanced financial technique to the global M&A market for the first time that maintains a balance in the financial soundness of both the acquiring and target companies."

Earlier, to raise acquisition funds, the company held roadshows targeting dozens of overseas institutional investors in the U.S. and conducted investment attraction activities. More than four times the targeted amount was raised, allowing the company to secure favorable financial terms. The acquisition process of a U.S.-listed company is usually demanding in terms of confidentiality and decision-making speed, but DL Chemical’s swift progress this time is expected to facilitate future additional M&A efforts. Despite differences in review periods and procedures compared to previous deals, the Korea Development Bank and the Export-Import Bank of Korea actively supported the transaction, leading to its successful completion.

According to the company, DL Chemical’s acquisition was approved at Crayton’s extraordinary shareholders’ meeting on the 9th. The U.S. regulatory authorities approved it last month, and the company expects approvals from other countries by the end of February next year. Kim Sang-woo, Vice Chairman of DL Chemical, said, "Based on solid cash-generating capabilities and technological expertise, we will continuously discover new growth engines to leap forward as a global petrochemical company."