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Can SKC Hit a Jackpot by Acquiring KCFT from LG Group?
Former LG Units Growing Rapidly Under SK Banner
Can SKC Hit a Jackpot by Acquiring KCFT from LG Group?
  • By Jung Min-hee
  • June 18, 2019, 10:33
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SKC Co., a chemical unit of SK Group, has recently acquired KCF Technologies Co. (KCFT), an electric vehicle copper foil maker, from LG Group.

SKC Co., chemical and tech material producing unit of South Korean conglomerate SK Group, has recently acquired KCF Technologies Co. (KCFT), an electric vehicle copper foil maker, from LG Group. Accordingly, all eyes are on whether SK Group will be able to hit the jackpot again as it did by acquiring SK Siltron Co. and SK Hynix Inc. from LG Group.

As SK Group has acquired KCFT from LG Group, there is a lot of interest in its performance. This is because LG Group’s affiliates acquired by SK Group, such as SK Hynix and SK Siltron, showed a huge improvement in performance after the acquisitions.

A case in point is SK Hynix. SK Hynix is actually a subsidiary of Hyundai Group but it has a mixture of corporate cultures of LG and Hyundai because the government forced LG Group to sell LG Semiconductor to Hyundai Electronics in 1999 during the Asian financial crisis

Hyundai Group which had financial difficulties after that gave up SK Hynix in 2001. The firm had been managed by creditors, including Korea Exchange Bank, until SK Telecom acquired it in 2012. SK Hynix recorded a loss in the first year of the acquisition but it has become the cash cow of the group with an operating profit of 20 trillion won (US$16.87 billion) last year, driven by full support from SK Group chairman Chey Tae-won.
 

SK Siltron, which was sold by LG to SK Holdngs Co. in 2017, also continues to show improvement in performance. Its consolidated annual sales came to only 800 billion won (US$674.71 million) when it was a subsidiary of LG Group. However, the figure grew to 1.30 trillion won (US$1.10 billion) last year and its operating profit also increased by more than 10 times to 380.40 billion won (US$320.82 million) from 34 billion won (US$28.68 million) in 2016.

The business community expects that KCFT will show a similar growth rate as well. Established in 1996 as a copper foil business unit of LG Metal, KCFT became part of LS Group when LG Group was split into smaller groups. Global private equity fund firm Kohlberg Kravis Roberts (KKR) & Co. bought the firm for 300 billion won (US$253.02 million) last year but SK Hynix acquired it again for 1.20 trillion won (US$1.01 billion) this time.

In the past, SK and LG rarely had to compete except for telecommunications business. However, the business community pays attention to the possibility of competition and M&A deals as the two groups now has more business areas overlapped. SK Group, whose main business were refining oil and telecommunications, has expanded its business areas to memory chips and batteries and is highly likely to compete or cooperate in some business areas, including mobility, in the era of the Fourth Industrial Revolution.