Focus on Supply Stability and Core Technology in Specialty Gas Business
Expecting Synergy with China Quzhou NF3 Project
Hyosung TNC Co., Ltd. is acquiring the specialty gases business of Hyosung Chemical Co., Ltd. to foster it as a future growth engine. Through this acquisition, Hyosung TNC will be able to leap forward as the world's second-largest supplier of nitrogen trifluoride (NF3) by production capacity.
Hyosung TNC announced on the 12th that it held a board meeting and decided to acquire the specialty gases business division of Hyosung Chemical. After receiving a letter of intent for acquisition from Hyosung Chemical in mid-November and reviewing the business feasibility, Hyosung TNC judged that the specialty gases business holds sufficient potential as a future growth engine.
Through an appropriate evaluation by an external institution, the acquisition price was set at a total of 920 billion KRW. Hyosung TNC plans to secure acquisition funds by utilizing liquid assets such as accounts receivable it has secured.
Acquisition Price of 920 Billion KRW... Completion Expected by End of January Next Year
Hyosung TNC plans to hold an extraordinary general meeting of shareholders on January 23 next year to approve the acquisition agenda. Following this, it will finalize the acquisition process by signing the business transfer contract for Hyosung Chemical’s specialty gases division and establishing a subsidiary (tentatively named Hyosung Neochem). The final acquisition is expected to be completed as early as the end of January next year.
This acquisition decision is based on a management diagnosis that discovering future growth engines is necessary for Hyosung TNC to secure growth potential going forward. Hyosung TNC’s spandex division has served as a cash cow for several years, based on its global number one position. However, due to the potential risk of being sensitive to industry changes, Hyosung TNC has continuously reviewed the discovery of new growth engines with high growth potential.
Hyosung TNC judged that the specialty gases business has sufficient business feasibility because it is a high-quality business that ▲ is expected to expand profits due to the semiconductor market’s upcycle transition and growth, ▲ has achieved approximately 56.5 billion KRW in EBITDA over the past three years, ▲ will create significant synergy effects by leveraging Hyosung TNC’s specialty gases business and global network, and ▲ can diversify the business portfolio to disperse risks from uncertain future management environments.
Furthermore, by adding the high-growth and profitable specialty gases division to its business portfolio alongside the spandex fiber division, Hyosung TNC expects to take a step forward as a high value-added materials specialized company.
Hyosung Chemical’s specialty gases business, which began producing NF3 in 2007, currently has an annual production capacity of 8,000 tons at its Ulsan and Ok-san, Chungbuk sites. In addition to NF3, it produces a total of six specialty gases including F2/N2, Cl2, D2, C4F7N, and HCl, thereby establishing a stable business portfolio.
Synergy Expected with Chinese Quzhou Corporation... "Leaping to World No. 2"
Hyosung TNC is also focusing on the synergy effect that can be maximized with the NF3 business operated in Quzhou, China, through this acquisition of Hyosung Chemical’s specialty gases business. The Quzhou NF3 business, which has been in production since 2016, has undergone one expansion and currently has an annual production capacity of 3,500 tons. By acquiring Hyosung Chemical’s specialty gases division, Hyosung TNC will secure a total annual NF3 production capacity of 11,500 tons, becoming the world’s second-largest NF3 supplier.
Based on Gartner data, the global NF3 market is expected to grow at an annual rate of over 12.2% until 2029. The NF3 market is heavily influenced by the semiconductor industry cycle, and its price volatility leads to significant profit fluctuations. Hyosung TNC plans to reduce the NF3 business proportion, which currently accounts for about 80% of total sales, to around 50% by 2029, while building a specialty gases business portfolio of about 20 different products through investments such as new product development, securing a profit structure centered on high value-added products.
Kim Chi-hyung, CEO of Hyosung TNC, stated, "Through continuous investment expansion in the specialty gases business, we will actively strive to grow Hyosung TNC beyond a textile specialist company into a high value-added materials-based industrial innovation leader encompassing specialty gases."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
