SK Innovation is acquiring the ethylene acrylic acid (EAA) business run by the Dow Chemical Co., expanding its chemical business areas. With the acquisition, SK will operate a chemical business in the United States for the first time.
SK Innovation announced on Feb. 2 that it signed a contract to buy Dow Chemical’s EAA business for US$370 million (426 billion won) through its affiliate SK Global Chemical. Dow Chemical is the largest chemical company in the U.S. The deal grants SK Innovation two of Dow Chemical’s global production facilities, one in Freeport, Texas, and another in Tarragona, Spain. Dow Chemical will also transfer manufacturing technologies, intellectual property and trademark rights related to the business.
An official from SK Innovation said, “We have jumped up to be the leading EAA maker in the world. Since our main business focused on general-purpose chemical products in the past, we were affected by global market conditions. But, we now have an opportunity to create a synergy by internalizing packaging technology in the high-value added market and connecting with existing product and production technologies.”
EAA is one of high value-added adhesive copolymers used in adhesives for packaging materials such as aluminum foil and polyethylene. This product is widely known as the PRIMACOR brand of Dow Chemical.
Due to high technology entry barrier, only five chemical companies in the world, such as Dow Chemical, DuPont and ExxonMobil, have set foot in the EAA market. Most of the demands also come from advanced markets like the U.S. and Europe. However, it has a great growth potential as the demand in emerging markets including China is expected to dramatically rise. SK Innovation is planning to target the North American and European markets through its new production bases in the U.S. and Spain. In addition, the company is considering a plan to add new facilities for the demand in Asian markets including China.
SK Innovation was able to purchase a core business of Dow Chemical due to the fact that Dow Chemical and DuPont are planning to merge as “Dow DuPont” in April. The European Union is opposing the merger of the two companies citing anti-trust regulations. Dow Chemical and DuPont are the two biggest players in the EAA market. Once the two companies are merged, their combined shares in the EAA market will be more than half, which means monopoly. Accordingly, Dow Chemical has no option but to sell its EAA business in order to solve anti-trust regulations. SK Innovation has become a new owner of Dow Chemical’s EAA business, beating 10 other global leading companies.