A landmark dealSamsung Group struck a big deal on Friday with Lotte Group, the fifth-largest business group in Korea, to sell it several of its chemical subsidiaries. Samsung, Korea’s largest chaebol, decided to sell Samsung Fine Chemicals, Samsung BP Chemicals and the chemical unit of Samsung SDI - the world’s leading battery supplier - to Lotte at the price of 3.26 trillion won ($2.86 billion). Lotte’s strengths are in hotels, retail, logistics and food.
That’s not only the largest merger and acquisition in our chemical industry, but also the biggest M&A on Lotte’s part since its establishment in Korea in 1967. It is also the largest business deal in Korea since the 1997-98 Asian economic crisis, as it surpasses the 1.9 trillion won M&A deal between Samsung and Hanwha Group over defense businesses in June.
After the remarkable deal, Samsung can concentrate on its core businesses, such as semiconductors and electronics. At the same time, Lotte has emerged as a powerful rival to Hanwha and LG Group in the chemicals business.
This sort of big deal was very uncommon in the past because of Korean companies’ tendency to follow in the footsteps of their founders. Most of them concentrated on expanding businesses. The idea of streamlining their affiliates to maximize efficiency was alien. Even when they kicked off a restructuring drive, most of the revamping ended up being superficial.
Such passive restructurings can hardly work in today’s overly competitive business environment. As the world economy slows, prospects for our exports are increasingly gloomy. Domestic consumption is likely to shrink due to Korea’s rapidly aging population.
Such changes will not allow Korean chaebol to expand their businesses forever. Even if they concentrate on their competitive core businesses, their survival cannot be guaranteed. Samsung, the undisputed global leader in semiconductors, feels a sense of crisis after China’s Tsinghua Unigroup’s announcement of a $23 billion bid for America’s Micron Technology and SanDisk, the third-largest manufacturer of flash memory in the world.
The government needs to pay attention to this new trend. After the government decided to offer another massive bailout package to financially troubled Daewoo Shipbuilding & Marine Engineering, the need to deal with zombie companies has only grown bigger. Big deals like Friday’s could serve as an effective tool for restructuring our industries to raise their global competitiveness.
JoongAng Ilbo, Oct. 31, Page 30