SK acquires Dow Chemical unit

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SK acquires Dow Chemical unit

SK Innovation is acquiring the ethylene acrylic acid business run by the Dow Chemical Company, the largest chemical company in the United States.

SK Global Chemical, an affiliate of SK Innovation, said Thursday it will purchase the Dow Chemical business unit as part of its efforts to diversify its business portfolio.

The deal grants SK two of Dow Chemical’s production facilities, one in Freeport, Texas, and another in Tarragona, Spain. Dow Chemical will also transfer manufacturing technologies, intellectual property and trademark rights related to the business at a cost of roughly $370 million.

Ethylene acrylic acid, or EAA, is one of the adhesive copolymers widely used in adhesives for packaging materials such as aluminum foil and polyethylene as it sticks particularly well on metal. For example, the material is used in aseptic packaging for foods, laminated tubes for toothpaste and sealant for drug packaging.

Despite the business’s profitability, Dow Chemical decided on the asset sale to shrink itself as its proposed merger with U.S. chemical giant DuPont has brought up antitrust concerns. While only a few major chemical companies in the world such as Dow Chemical, DuPont and ExxonMobil have set foot in the sector due to the high technology entry barrier, the acquisition grants SK a chance to expand its product portfolio.

“We can now expand our portfolio in the high value-added packaging business banking on synergy created by [the acquisition] and our existing products such Nexlene, a high value-added polyethylene product developed through our own technology,” a spokesperson from SK Innovation said.

Currently, the ethylene acrylic acid market is expanding at more than 2 percent annually, according to data from CMR. It was a roughly 140,000-ton market globally in 2016, and demand from nations such as China is expected to grow rapidly, at about 7 percent yearly, SK Innovation said in a statement.

“The acquisition upgrades our business portfolio to be centered more on high value-added products, which is more tolerant against a rapidly changing market environment,” said Kim Hyung-gun, CEO of SK Global Chemical. “We will continue strategic investment to upgrade our business portfolio and lead the high value-added chemical market of developing nations in the long term.”

SK Innovation, through earlier statements, vowed on a maximum 3 trillion won ($2.6 billion) aggressive investment this year to strengthen its chemical business and electric car battery business. The acquisition is this year’s first investment.

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