South Korea's SKC intends to sell polyols subsidiary SK pucore

South Korea's SKC is planning to sell its polyols subsidiary SK pucore to a private equity firm, in a move to clean up assets to focus on chips and secondary battery materials.

SKC is currently in talks to sell SK pucore to Glenwood private Equity for around 500 billion won ($390 million), multiple investment banking industry sources said on Monday. The two companies recently signed a memorandum of understanding and expect to sign a contract shortly after conducting due diligence. The deal is expected to be worth about 10 times last year's earnings before interest, taxes, depreciation and amortization.

SK pucore(formerly MCNS) is a company jointly established in 2015 by SKC and Mitsui Chemical of Japan to produce polyols, a raw material for polyurethane. The company changed its name after the partnership with Mitsui Chemical ended in 2021. SK pucore dominates the polyols market in South Korea. Last year, it accounted for 40% of the total market.

The sale comes as SKC looks to build up cash for investments and improve its finances. SKC announced that it would invest 1.8 trillion won to strengthen its semiconductor and secondary battery materials business. SKC is buying ISC, a semiconductor testing company, for 400 billion won.

SKC's net debt to EBITDA ratio was more than six times in the first quarter of this year, up from 3.5 times in 2021. The company's net debt stood at 3.6 trillion won as of the first quarter.

Glenwood PE is a mid-cap private equity fund manager in South Korea. It recently acquired the diagnostics unit of LG Chem LTD and is the second-largest shareholder in Hanwha Advanced Materials Corp and CJ Olive Young Corp. Glenwood also manages PI Advanced Materials, which it previously acquired from SKC. Synergies are expected through the latest deal.

SK pucore has more than 450 customers, more than 130 distribution partners, and production facilities in five countries. SK pucore posted 720.6 billion won in sales and 32.4 billion won in operating profit last year. Polyurethane produced using SK pucore's flagship product polyols is used in a wide range of downstream industries, including automotive, fashion, electronics, and medical devices, among others.

SK pucore has recently secured its future growth engine by developing eco-friendly polyols. The customer returns the discarded polyols to SK pucore, which makes recycled polyols and returns them to the customer. The company is also accelerating the production of bio-polyols based on vegetable oils.