Hyosung Chemical Special Gas Deal Falls Through, Negotiations Break Down as Prices Drop Again

South Korea's Hyosung Chemical has hit a snag over its plan to sell its specialty gases business to optimize its financial structure. Negotiations between the two sides failed to achieve the expected results due to the failure to reach a consensus on price with potential buyers, and it is suspected that negotiations have broken down.

According to South Korean media reports on November 20, Hyosung Chemical has announced on its electronic disclosure system that it will withdraw the previously selected IMM Private Equity and Stick Investment consortium as the preferred negotiating object for the special gases business unit. The company said, We have been negotiating with the company since we selected the company in July last year, but we have decided to withdraw our selection because we could not reach an agreement. It added that it was "currently in discussions with other investors".

Initially, the special gas business unit was sold for 1.5 trillion won, which was later adjusted to 1.3 trillion won. However, after due diligence, the price was further lowered to Won1.1tn. Financial investors recently said they could not accept a price of one trillion won.

With the removal of the Youhyup option, other financial investors now have the opportunity to participate in the transaction of Hyosung Chemical's specialty gases business. The deal has attracted the attention of many domestic and foreign private equity funds (PEF) since its initial listing.

Hyosung Chemical's Specialty gases division has a nitrogen trifluoride production facility with an annual capacity of 8,000 tons, making it the third-largest producer in the world, behind South Korea's SK Specialty and China's CSSC Special Gas.

In early May, South Korea's Hyosung Chemical, which considers itself the world's third-biggest producer of nitrogen fluoride, planned to sell a minority stake (49%) in its specialty gases business. Hyosung Chemical values the specialty gases unit at Won1tn and expects to earn Won500bn in revenue from it, but potential acquirers value the unit at up to Won700bn, valuing the 49 per cent stake at up to won350bn.

On June 27, it was reported that Hyosung Chemical may sell its management stake in the specialty gases division instead of a minority stake and will choose between two companies, Stick Investment and IMM Private Equity (PE). The price is expected to be around 1.5 trillion won.

On July 12, Hyosung Chemical announced that it had selected STIC Investment and IMM Private Equity consortium as preferred negotiating partners for the sale of the specialty gases business. Hyosung Chemical sold 100 percent of its special gas division at a price of 1.3 trillion won. IMM PE and STIC Investment will each pay 650 billion won for the acquisition, and each will hold 50 percent of the shares.

According to investment banking (IB) industry sources on September 11, Hyosung Chemical and IMM PE/STIC investment consortium confirmed the final transaction price of the specialty gas unit at 1.2 trillion won.

On October 23, Hyosung Chemical's Special gas (NF3) unit was repriced at 1.17 trillion won, down 10 percent from the 1.3 trillion won initially discussed. The deal is expected to close this month, after which securitisation of other assets such as Hyosung Vina Chemical, a Vietnamese company, is expected to accelerate.

The latest news on November 20 shows that the negotiations between the buyers and sellers are suspected to have broken down, and Hyosung Chemical announced on the electronic disclosure system of the Korean Financial Supervisory Service that it will withdraw the previously selected IMM Private Equity and Stick Investment consortium as the preferred negotiating object of the special gas sector.