LG Chem Exits World’s No.2 Water Treatment Business, Sells for 1.4 Trillion Won

Accelerating the Streamlining of Non-Core Businesses with Sale to Glenwood PE
Focusing on Batteries, Eco-Friendly Materials, and Pharmaceuticals: Emphasis on 'Three Major New Growth Engines'
The Beginning of Koo Kwang-mo's Portfolio Advancement Strategy

LG Chem is winding down its water treatment filter (water solution) business, which it has developed for over a decade. Although the company rose to become the world’s second-largest player in reverse osmosis (RO membrane) technology, it has decided to exit the business to focus on strengthening its core operations and fostering future growth businesses. This move is seen as an acceleration of actual portfolio restructuring following LG Group Chairman Koo Kwang-mo’s remarks on "selection and concentration" in April.

On June 13, LG Chem announced that its board of directors had resolved to sell the water solution business, which is part of the Advanced Materials Division, to the private equity fund Glenwood Private Equity for 1.4 trillion won. Previously, LG Chem had selected Glenwood Private Equity as the preferred bidder for the sale and had been negotiating with the firm.

The reverse osmosis (RO membrane) technology of LG Chem will be introduced at the Ashdod seawater desalination plant in Israel. Asia Economy DB

Last year, the water solution business recorded sales of 222 billion won, accounting for 0.45% of LG Chem’s total sales of 48.9161 trillion won. Its asset size is 377 billion won, equivalent to 0.40% of the company’s total assets. The transfer price represents 2.92% of the company’s consolidated equity capital. In the current reverse osmosis membrane market, LG Chem holds the second-largest global market share, following Japan’s Toray.

LG Chem entered the water treatment filter market by acquiring US-based NanoH2O in 2014 and building a dedicated plant in Cheongju. Last year, the company even expanded the Cheongju plant and set a goal to double the business scale within five years. However, as the downturn in its core petrochemical business persisted, LG Chem decided to focus on financial soundness and strengthening its key growth drivers.

Regarding this business transfer, LG Chem explained, "This portfolio adjustment is intended to focus resources and capital on our three major new growth businesses: battery materials, eco-friendly materials, and pharmaceuticals." The decision was made by board resolution without a special resolution at the shareholders’ meeting, and the execution of the transaction has been delegated to the CEO.

There are expectations that the streamlining of non-core businesses will accelerate not only for water treatment filters but across the entire group. In fact, LG Chem is considering withdrawing from certain material businesses such as separators, and restructuring in the petrochemical segment is also seen as inevitable. The operating rate of the naphtha cracker (NCC), which exceeded 90% in 2021, dropped to the 70% range by mid-2023. Regarding the restructuring of the petrochemical portfolio, an LG Chem official stated, "The current deficit is on a decreasing trend."

Earlier in April, Chairman Koo Kwang-mo stated at an executive meeting, "It is a reality that we cannot excel in every business, but that is precisely why we must focus and make choices," emphasizing, "We must prioritize businesses that offer sustainable competitive advantage and high entry barriers, and align the priorities of capital investment and execution accordingly."