China’s GCL-Poly Energy Holdings Ltd. (GCL), world’s largest manufacturer of solar power panel material polysilicon, is said to have embarked on the process of buying SMP Ltd., a polysilicon unit of South Korean conglomerate Lotte Group that is currently under workout program.

According to multiple sources from the investment bank industry on Thursday, GCL has launched due diligence on SMP early this month and is reviewing the company’s asset conditions. The Chinese company is known to be focused on examining polysilicon manufacturing facilities of SMP with the help of Ulsan District Court and accounting firm Deloitte Anjin LLC. If GCL conveys interest in the buyout of SMP after conducting due diligence, official acquisition process is likely to begin early next year, sources noted.

The acquisition, if successful, is expected to allow GCL to solidify its leading position in the world’s ever-competitive polysilicon industry. REC Silicon ASA, a United States-based producer of advanced silicon materials, and a private equity fund in the United Kingdom is also known to have expressed interest in buying SMP.

Industry insiders noted that GCL has engaged itself in the bidding of SMP to lock up its leading position in the global polysilicon industry with 24 percent market share at a time when overall profitability in the industry has steadily deteriorated amid falling supply price since 2014. Polysilicon manufacturers have been engaged in the race on economies of scale.

South Korea’s OCI Co., world’s third-largest polysilicon manufacturer with 18 percent market share, is currently putting out efforts to acquire Tokuyama Corporation’s facility in Malaysia while Germany’s Wacker Chemie AG that is closely behind GCL with 23 percent market share has completed building a polysilicon production facility in the U.S. state of Tennessee in April.

SMP is a polysilicon manufacturer that was established in 2011 based on a 50 to 50 investment by Lotte Fine Chemicals Co., formerly known as Samsung Fine Chemicals Co., and SunEdison Inc., a global renewable energy company based in the U.S. In 2014, SunEdison bought an additional 35 percent stake in SMP from Samsung Fine Chemicals to become the largest stakeholder with 85 percent ownership. Lotte Fine Chemicals acquired the remaining 15 percent stake as part of a deal when Samsung Group sold its chemicals business to Lotte Group. SMP has been under corporate rehabilitation since May last year amid difficult management conditions.

By Yoo Tae-yang

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