Korean petrochemicals companies, backed by improved earnings, are pushing to take over foreign rivals that specialize in high-end products, in a bid to diversify their revenue sources and fend off rising competition from Chinese rivals, industry sources said Tuesday.
According to the sources, SK Global Chemical, a unit of SK Innovation, the country's top refiner, has been rebalancing its business portfolio focusing on high-end and high value-added products.
SK headquarters in Seoul (Yonhap)
"We are reviewing a variety of options, including a stake purchase and joint ventures," said an official at SK Global Chemical. The official said the company is on the lookout for Chinese firms and other smaller foreign rivals for potential takeovers.
LG Chem, the country's top chemicals firm, is also seeking to find new revenue sources through mergers and acquisitions.
During an annual shareholder meeting last week, LG Chem CEO Park Jin-soo, said his company will consider a strategic M&A while focusing on traditional and new business areas such as bio and new materials.
In January this year, LG Chem signed a 515 billion won ($442 million) deal to take over Dongbu Hannong, a local fertilizer producer, as part of efforts to diversify its revenue sources.
Their emboldened M&A push came as they racked up a stellar performance last year on the back of improved business margins. SK Innovation logged an operating income of 1.82 trillion won last year, with the comparable figure for LG Chem being 1.82 trillion won.
Lotte Chemicals also posted a record operating income of 1.6 trillion won last year.
Meanwhile, Chinese rivals are ratcheting up moves to expand their output capacity for ethylene and propylene to reduce dependency on imports. (Yonhap)