Tipping Point
The Fair Trade Commission (FTC) conditionally approved the Hanwha Group’s acquisition of the Samsung Group’s chemical subsidiary.
Recently, the FTC called Hanwha’s monopoly in the ethylene vinyl acetate (EVA) market into question during its examination on business consolidation, which was expected neither by Hanwha nor by Samsung. The EVA is a high-value-added product in use in solar panels. In 2013, Hanwha Chemical accounted for 38 percent of the domestic market, followed by Lotte Chemical (25 percent), Samsung Total (17 percent), and LG Chem (13 percent).
Once Hanwha takes over Samsung Total, its market share will increase to 55 percent and the gap with runners-up will widen. According to the FTC, anti-trust regulations will be applied to any company recording a market share of over 50 percent or exceeding the market share of the second-ranking company by a margin of at least 25 percentage points.
The Hanwha Group was concerned over the rules deterring the progress of the M&A deal. It appealed to the commission that 70 to 80 percent of the EVA it produces in Korea is for export purposes, and thus the application of the rules should be reconsidered. In 2013, Hanwha produced 360,000 tons of EVA and sold only 100,000 tons of it in the domestic market.
In the light of that news, the FTC gave conditional approval and Hanwha welcomed the news, saying, “The M&A deal will lead to greater competitiveness based on the economy of scale and cost reductions, although the entire petrochemical industry of Korea is facing difficulties these days due to low oil prices.”
What remains now for Hanwha are formalities such as board of directors and shareholders’ meetings. It clarified that the due diligence and acquisition processes would not be delayed by labor union opposition. “Samsung will take care of the compensation issue, and we are preparing the money for the acquisition without any problem,” it mentioned, stressing that the employees do not have to be worried about their jobs.