DL: Chemical makes global M&A history of new Korean company
DL Chemical has made global M&A history for a new Korean company, having acquired a US listed company using leveraged buyout (LBO) mode for the first time as a Korean company . DL Chemical raised USD 950 million (KRW 1.12 trillion) on the global financial market to secure financing for the acquisition of US-based Kraton, whose acquisition was confirmed on September 27. DL Chemical has also signed a financial agreement worth 850 million USD (1 trillion KRW). ) with the Korea Development Bank and the Export-Import Bank of Korea on the 20th. DL Chemical managed to secure an acquisition fund of KRW 3 trillion, including its own cash, within two and a half months announcement of the acquisition.
What attracts attention in the M&A is the M&A strategy of DL Chemical by LBO. This is the first case of a Korean company seeking an LBO to acquire a US listed company, so the M&A industry is paying attention. By strategically combining global fund and domestic financial market, the new method of finalizing financial sourcing in such a short time is considered an outstanding strategy that can be extended to mergers and acquisitions of foreign companies by Korean companies.
The LBO consists of acquiring 100% of the capital by receiving loans from financial institutions with the assets of the company acquired as collateral to obtain the funds necessary for the acquisition of the company. The LBO method is associated with a high interest rate to maximize the secured loan of an acquired company in general. However, DL Chemical has adopted a method of combining M&A financing obtained through Korean financial institutions for LBO financing. Through this, DL Chemical has demonstrated an advanced financial technique that reduces Kraton’s financial costs and debt ratio and maintains the financial strength and balance of both companies for the first time ever in the global M&A market. .
▣ DL Chemical impresses with its M&A capabilities in domestic and overseas capital markets through quick decision-making and proven management competence
DL Chemical held a deal roadshow last month targeting dozens of foreign institutional investors in the United States to quickly secure global funding. If more than twice the funding to be obtained is received, the operation is considered successful; having received orders for more than four times the funding to be raised, DL Chemical was however able to secure favorable financial terms. This is seen as the global financial market’s dependence on DL Chemical for rapid decision-making processes, as seen in the merger and acquisition of Cariflex last year, as well as recognition of the synergy acquisition of Kraton.
Since confidentiality and quick decision-making are essential for the merger and acquisition of a US company, it is considered the most difficult level of an M&A transaction. So far, Korean companies have suffered in terms of quick decision-making and due diligence, making it difficult for them to establish their presence in the US M&A market of listed companies. With the success of the transaction, DL Chemical can establish a reliable benchmark in the global financial market, namely the successful merger and acquisition of Kraton, after Cariflex last year. DL Chemical may propel its strategy further for further mergers and acquisitions in the future.
▣ DL Chemical guarantees optimal financial conditions with the active support of KDB and the Export-Import Bank of Korea
For the success of the operation, the KDB (Korea Development Bank) and the Export-Import Bank of Korea provided active support. Despite differing from M&A terms and conditions in all aspects, including financial practices, screening period and procedures, the two banks have supported M&A financing in line with rapid progress in US financing.
KDB has supported DL Chemical’s core business since the merger and acquisition of Cariflex last year and the creation of Dlex Polymer this year, in addition to the merger and acquisition of Kraton. The Export-Import Bank of Korea has supported various new ventures propelled by DL Group companies since the old days of Daelim. Both banks have decided to fully support DL Chemical, relying on Kraton’s entrepreneurial capabilities as Kraton boasts of no. 1 market share in the US and European SBC market and the world’s largest green biochemical company, as well as DL Chemical’s strong cash generation capabilities.
▣ DL Chemical plans full global management from Q1 next year
DL Chemical plans to accelerate M&A procedures for full-throttle global management from the first quarter of next year. Kraton held a temporary general meeting of shareholders on 9andand approved the acquisition of Kraton by DL Chemical. The remaining procedure involves the approval of the business combination by the regulatory authorities of the main countries. Approval from U.S. regulators was secured last month, with approval from other major countries except the United States expected to be completed by the end of February.
“We have proven DL’s M&A capabilities in the global financial market by achieving a successful LBO M&A of a US-listed company in the first year of DL’s launch. Chemical. We will continually discover a new engine of growth to take off as a global petrochemical company based on strong cash generation competence and high-level technological capabilities,” said VP of DL Chemical. , Kim Sang-woo.
Houston-based Kraton is a global petrochemical company with more than 800 patents. It operates 13 production plants and 5 R&D centers in major markets around the world, including the United States and Europe. Kraton’s leading products in the polymer business are hygienic adhesives, materials for medical use, styrene block copolymer (SBC) and an advanced engineering material used for automotive interiors. Enjoying the largest market share in the US and European markets, Kraton is recognized as the largest biochemical company manufacturing chemicals by refining the by-products of the pine pulp production process. Its biochemical production capacity is 700,000 tons per year, and Kraton manufactures products ranging from environmentally friendly fuels such as biodiesel to highly functional tire materials and other materials, including environmentally friendly adhesives.