South Korea’s battery and chemical company LG Chem is pushing for a merger with LG Group’s pharmaceutical affiliate LG Life Sciences in an apparent move to catch up with Samsung’s bio business, industry sources said Tuesday.
“We are considering a merger with LG Life Sciences although the exact date has not been confirmed yet,” an LG Chem official said.
The group’s top management recently decided not to sit back and watch as the Samsung Group pours money into the bio business and Hanmi Pharmaceutical’s stock price surges from medicine development, a local media outlet reported, citing a senior source from LG Group.
LG Life Sciences, despite securing business capacity, has not grown much with limited investment and support within the group. The pharmaceutical company obtained approval from the US Food and Drug Administration for its antibiotic Factive, as the first Korean firm to do so. Its new diabetes medicines Zemiglo and Zemimet also generated 24.8 billion won ($22.4 million) in sales last year.
LG Chem also jumped into the bio business in April by acquiring agrochemical technology manufacturer Farm Hannong with the aim of expanding its seed and agrichemical business.
Industry watchers said the merger -- if successful -- would create synergy between the two firms and LG Chem’s bio business will become more concrete.
“LG Chem is now desperate in seeking new investments with its high cash flow. If the merger becomes successful, its petrochemical, information technology materials -- batteries -- and bio business will play pivot roles in the company’s business,” said Hwang Yoo-sik, an analyst at NH Investment & Securities.
The two firms are slated to hold board meetings this week to submit the agenda for the merger. The merger is expected be done in the way that LG Chem, whose market value is over 17 trillion won, will buy shares of LG Life Science, whose market capitalization stands at around 1.1 trillion won.
Following news reports Tuesday on the possible merger, LG Life Sciences’ stock price rose 5 percent to reach 70,400 won. LG Chem’s stock price fell by 5 percent to 253,500 won because of the burden for the massive investment.
Samsung Group has reportedly invested more than 10 trillion won over five years in the bio business as its new growth engine under the leadership of its Vice Chairman Lee Jae-yong.
In August, the US Food and Drug Administration accepted for review a new Lantus biosimilar developed by US-based Merck Sharp & Dohme with partial funding from Samsung Bioepis, the biosimilar developing unit of the group.
By Shin Ji-hye (
shinjh@heraldcorp.com)
