Friday, April 4th, 2014
SEOUL, KOREA - Despite a large-scale merger between Samsung SDI and Cheil Industries on March 31 making the former company a behemoth with assets in excess of 15 trillion won, the stock market responded with little excitement. As soon as the news was out, Samsung SDI's share price shot up to 161,000 won, 6.62 percent on the 31st. In the following day on April 1, however, the price went back down to the 150,000-won level to 157,500 won at 2:08 pm. Meanwhile, the price of Cheil Industries fell 2,400 won to 69,300 won.
This is largely because of the expectations that it would take a lot of time to see tangible synergies from the merger. Some other analysts said although Samsung SDI's business portfolio has been diversified from the combination its core competency may be further diluted.
The two companies will finalize the transaction on July 1 after a general shareholders meeting on May 30. Once the deal is closed, Samsung SDI will be a giant with assets of 15 trillion won, sales revenue of 9.5 trillion won, market capitalization of 10 trillion won, and employees of 14,000. This is the fifth largest among Samsung Group companies. The group expects the marriage between Samsung SDI and Cheil Industries would complete the vertical value chain from materials (Cheil Industries) to parts and components (Samsung SDI, Samsung Display, etc.) and to Samsung Electronics (finished goods).
Eugene Investment & Securities analyst Yoon Hyuk-jin said, "It is fortunate for Samsung SDI not to pay dearly for Cheil Industries as the chemical and display industries were at their worst downturn. But it will take a long time for Samsung SDI to reap synergies from the businesses that Cheil was developing such as plasma membrane, OLED materials, and synthetic resins for auto body."
Eoh Kyu-jin, analyst with IBK Investment & Securities, commented, "The areas that synergy effects can be expected from the merger are rechargeable battery plasma membrane and OLED materials. Of these, plasma membrane is expected to be commercialized by this year's end at the earliest. As for the OLED materials, synergies will be limited as Samsung SDI is already engaged in the same business in the energy area."