Samsung SDI spins off its chemical unit to Lotte group

Samsung SDI’s shareholders Monday officially approved spinning off the chemical business so the company can concentrate on batteries for electric vehicles, its new growth driver.

Samsung SDI CEO Cho Nam-seong vowed at a shareholders’ meeting Monday to spend over 3 trillion won ($2.51 billion) on the electric vehicle battery business over the next five years.

“The company aims to become a top producer of electric vehicle batteries by 2020,” he said, adding the funding will be mostly allocated to adding production lines and research and development.

The shareholders’ approval came three months after the battery and energy arm of Samsung Group announced it would spin off the chemical unit.

The spun-off chemical unit will start operating independently on Feb. 1 and Lotte Chemicals, the chemical arm of Lotte Group, will acquire 90 percent of the business in the first half of the year and buy the remaining 10 percent after three years.

Lotte Chemicals will pay 2.59 trillion won for 90 percent of the shares.

The money-losing electric material businesses will remain within Samsung SDI.

SDI’s chemical arm, which supplied materials for TVs, computers and mobile phone screens, was as a cash cow for the company. In the third quarter of last year, SDI’s chemical unit had revenues of 677 billion won, one third of the company’s total revenues. That’s why it commands a high price from the buyer.

SDI now sees future potential in the battery business. The battery unit deals with small-sized lithium-ion batteries for laptops, smartphones and wearable devices, and large, eco-friendly automobile batteries.

“The loss of the chemical unit will deal a blow to short-term earnings,” said Ryu Young-ho, an analyst with KDB Daewoo Securities. “But rapid revenue growth in the large battery unit will encourage the market to reassess the company’s mid- and long-term prospects.”

Ever since the chemical unit’s spin-off was announced last October, local brokerages have been speculating about structural changes within Samsung Group with SDI at the center. Some speculated that SDI may merge with Samsung Electro-Mechanics, or that Samsung Electronics may acquire both SDI and Electro-Mechanics. Samsung Elecrtro-Mechanics specializes in sensors for electric vehicles.

“The key determining factor at present is how Samsung Electronics intends to go with its electric vehicle business,” said an analyst who requested anonymity.

Samsung Electronics announced later last year that the smart car business, which encompasses electric vehicles, parts and auto-pilot functions, will become a crucial part of its future growth after global IT players Apple and Google had already plunged into the business.

The tech giant launched a new business unit designed to develop infotainment systems and autopilot functions in a reshuffle in December.

Since 2009, Samsung SDI has supplied lithium-ion batteries to BMW for electric vehicles. SDI will supply Audi with batteries for an all-electric SUVs.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]