SK Innovation inks deal to buy PVDC business

SK Innovation, Korea’s top oil refiner, has signed a deal to acquire a chemical business from Dow Chemical, the largest petrochemical company in the United States, through its affiliate SK Global Chemical.

The company said on Wednesday that SK Global Chemical has inked a sales and purchase agreement to buy a polyvinylidene chloride (PVDC) business from Dow Chemical. SK Global Chemical is one of five subsidiaries and the chemical arm of SK Innovation.

“SK innovation acquired Dow Chemical’s entire PVDC business,” said a company spokesperson. “It also secured the trade mark rights of a PVDC brand called Saran, production facilities in Michigan and related manufacturing technology and intellectual property.”

The agreement announced on Wednesday is the second deal that SK’s chemical unit has made with Dow Chemical. Earlier this year, SK acquired an ethylene acrylic acid unit from Dow for $370 million. The value of the buyout announced Wednesday was not fully disclosed, but the company said it was less than 98 billion won ($86 million), or 2.5 percent of the capital ratio of SK Global Chemical. Companies are not obliged to reveal the value of sale unless it exceeds 2.5 percent of their capital ratio.

PVDC is a packaging material used for refrigerated and frozen food products, which requires a high level of insulation, the company explained. As the number of suppliers in the global packaging industry that can provide high-end materials such as PVDC is limited, the company expects the newly acquired business will help boost its market share in the sector, including the market in China. The company already has advanced materials for packaging, including Nexlene, which SK Global Chemical developed.

“SK innovation will take advantage of this opportunity to expand into China, one of the world’s largest packaging markets, with SK global chemical’s infrastructure and networks,” the company spokesperson added.

“We will focus our capabilities on developing a diverse product portfolio and technologies through securing high value-added packaging and automotive materials” said SK global chemical CEO Kim Hyung Kun. “We will also secure core materials and technologies through R&D, M&A, and joint ventures to become the top player in the global market.”

Acquiring chemical businesses from Dow Chemical is seen as an apparent attempt by the company to expand and diversify its portfolio to ultimately overhaul its profit structure, which is currently centered on oil refinery.

Earlier this year, the company said it will pour as much as 3 trillion won ($2.6 billion) into expanding its businesses in the chemical and battery sectors.

Developing batteries for electric vehicles is a key agenda for SK Innovation. Last month, the company developed a type of battery that it claimed can extend the driving range of electric vehicles by 100 kilometers (62 miles). SK Innovation hopes to acquire 30 percent of the global market share in battery production by 2025.

“We will invest in non-refining sectors such as chemicals and batteries and innovate our business structure by improving our business models,” said Kim Jun, the CEO and President of SK Innovation, through a press release.

BY CHOI HYUNG-JO [choi.hyungjo@joongang.co.kr]