Woongjin Chemical bid raises tech-leak worries

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Woongjin Chemical bid raises tech-leak worries

The merger and acquisition competition for Woongjin Chemical is heating up, with Toray Advanced Materials Korea emerging as the preferred bidder and other companies worrying about a technology leak if the subsidiary of Japan’s Toray Group takes over.

According to industry sources, TAK last Tuesday offered 430 billion won ($397 million) for a 56.2 percent stake in Woongjin Chemical currently held by Woongjin Holdings, the holding company of cash-strapped Woongjin Group.

The amount from TAK is believed to be the highest bid, beating rivals like LG Chem and GS Energy, which reportedly offered 400 billion won. The other bidder was midsize Korean chemical company UNID. Lotte Chemical, a major petrochemical company under Lotte Group, did not participate.

Selection of the preferred bidder was to have been finalized last week, but Woongjin Holdings postponed a decision until after the Chuseok holiday. The M&A process is managed by Woori Investment and Securities and Korea Investment and Securities.

The price of Woongjin Chemical was estimated at 300 billion won. Experts said that unlike other M&A cases in which private equity firms submit bids, the sale of Woongjin Chemical attracted major corporations lured by its water filtration technology.

Woongjin Chemical has built a solid reputation in seawater desalination and the development of reverse osmosis filters. It is currently eyeing the No. 3 spot in a globally reserve osmosis market estimated at more than 1 trillion won annually.

The company last year had sales of 1.11 trillion won and operating profit of 28.5 billion won, but with the water businesses seen as growth engines of the future, Woongjin Chemical has been tabbed as a promising company to generate cash.

However, with selection of a preferred bidder right around the corner, local competitors have expressed concern over the acquisition of TAK by a Japanese conglomerate.

Woongjin entered nation’s seawater desalination project in 2006 and developed the technology for seawater desalination reverse osmosis membranes. Industry insiders said such technology will pave the way for local companies to enter the seawater desalination market, which is dominated by the United States and Japan.

Meanwhile, officials at TAK said they have dismissed such worries, saying the company already has more advanced technology than Woongjin Chemical. Toray is the world leader in industrial filters for desalination plants.

“It’s not right to say that a foreign-based company buying a local company leads to technology leaks,” said a TAK official. “Why is such a claim made now and not from the beginning?”

TAK supporters claim that if the company buys Woongjin Chemical, both can create synergy because their business roots are similar and they know each other well. TAK and Woongjin Chemical even share a plant in Gumi, North Gyeongsang, because they were both once managed by Saehan Group.

BY JOO KYUNG-DON [kjoo@joongang.co.kr]
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