DL's $2.5 billion acquisition boosts stock price

DL's $2.5 billion acquisition boosts stock price

Kraton’s manufacturing facility in the United States / Yonhap

By Kim Yoo-chul

The share price of DL Holding jumped 7.92 percent at Tuesday’s exchange close with investors hailing its affiliate’s decision to acquire a U.S. company to expand its presence in the booming specialty chemical business sector.

DL Holding’s shares ended at 76,300 won on the KOSPI, according to data provided by the Korea Exchange (KRX), the country’s top bourse operator. On the same day, DL Chemical, a leading petrochemical company owned by DL Holdings, said it had acquired U.S.-based specialty chemical producer Kraton Corp.

The South Korean firm, formerly known as Daelim Industrial, said in a statement that it reached a deal to buy the Texas-based company in an all-cash deal. JPMorgan advised Kraton on the transaction, with Goldman Sachs working for DL Chemical.

DL Chemical said it paid $1.6 billion to acquire Kraton, although the latter said it agreed to sell itself Chemical for an enterprise value of $2.5 billion. Regarding the gap, DL Chemical said the acquisition price included Kraton’s net debt of $900 million.

Regarding acquisition price metrics, at $46.50 a share in cash, the transaction values the South Korean company at a 12 percent premium to its $41.52 closing price last week in New York; and about 50 percent to its unaffected market value as of early July.

“The deal will allow us to provide a wider range of products and serve end markets in more than 70 countries,” DL Vice Chairman and CEO Kim Sang-woo was quoted as saying in a statement.

DL has fully committed financing, Kraton said, and the companies expect the deal to be closed in the first half of next year.

Because Kraton will be controlled by DL Chemical’s U.S. operation, it is set to be delisted from the NYSE. The massive transaction came after DL’s $530 million purchase of Cariflex from Kraton last year in its first-ever overseas acquisition.

DL said the all-stock acquisition was to bolster its profile in the specialty polymer market. Specialty polymers are an additive in demand from the automotive and chip industries.

The U.S. company is the top provider of pine-based specialty products for use in adhesives and road paving, in addition to tire materials. Kraton operates facilities in 13 countries including France, Brazil, Japan, the Netherlands and Germany, as well as five research centers.

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