Samsung suppliers merge to strengthen operations

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Soulbrain Holdings Co., a South Korean supplier of advanced materials to Samsung Electronics Co., is currently engaged in advanced negotiations to acquire a controlling stake in DNF Co., another significant supplier to Samsung. This strategic move, valued at 114 billion won (approximately $87 million), aims to bolster Soulbrain’s semiconductor materials division. The intention behind the acquisition is to increase Soulbrain’s competitiveness within the semiconductor sector.

Reports from the investment banking industry indicate that Soulbrain Holdings seeks to purchase a substantial 19.70% stake in DNF, primarily from DNF’s founder and Chief Executive, Kim Myung-woon, and related entities. The proposed acquisition price for this stake is 50,000 won per share, culminating in a total acquisition cost of around 114 billion won. To further facilitate the transaction, Soulbrain Holdings intends to raise its stake in DNF through a rights offering, which would contribute to reducing the overall acquisition expenses.

Notably, DNF’s shares recently closed at 23,950 won per share, reflecting an 8.8% decrease from the previous session. In contrast, Soulbrain Holdings’ shares rose by 1% to 25,150 won on the same day. Similarly, shares of Soulbrain Co., the high-tech materials-producing subsidiary of Soulbrain Holdings, experienced a gain of 1.8% to close at 260,000 won.

Both Soulbrain Holdings and DNF are integral suppliers of semiconductor materials to Samsung Electronics. Moreover, Samsung Electronics holds the position of the second-largest shareholder in DNF. These two companies have collaborated since 2005, working together to develop crucial materials for semiconductor wafer patterning processes.

The potential merger of these two suppliers has sparked discussions regarding the future of Samsung Electronics’ stake in DNF. Sources within the high-tech materials industry suggest that Samsung Electronics is contemplating the possibility of divesting its stake in DNF.

Soulbrain Holdings Chairman Chung Ji-wan’s strategic vision for diversifying and strengthening the semiconductor materials business prompted the move to acquire DNF. With a history dating back to 1986, Soulbrain Holdings encompasses a range of high-tech materials businesses, including precursors. The company is a vital supplier of semiconductor and display materials to prominent entities such as Samsung Electronics, SK Hynix Inc., LG Display Co., and Samsung Display Co.

Precursors are fundamental materials used in the process of wafer patterning, and DNF has emerged as a prominent player in the Korean precursor market, particularly following export restrictions imposed by Japan in 2019 on high-tech materials crucial for chip and display manufacturing.

In the fiscal year 2022, Soulbrain Holdings recorded an operating profit of 207 billion won from total sales of 1.1 trillion won, with semiconductor materials contributing to 77% of the overall sales. During the first quarter of the current year, the company achieved an operating profit of 49 billion won from sales amounting to 242.9 billion won.

As for DNF, its operating income for 2022 reached 16.3 billion won, supported by sales of 135.1 billion won. The first quarter of this year saw DNF’s operating income at 500 million won, alongside sales totalling 28.7 billion won.

To facilitate the acquisition, Soulbrain Holdings’ investment subsidiary, NAU IB Capital Co., will take the lead in the deal-making process.