Waste battery recycling company Sebitchem up for sale

[Graphics by Kim Eo-Jin]

Sebitchem Co., a medium-sized South Korean enterprise that has been contributing to the waste battery recycling market alongside SungEel HiTech Co., is known to be pursuing the sale of its management rights.

The sale comes just two years after the company was listed on the Kosdaq market and as the electric vehicle (EV) market remains sluggish. According to multiple sources from the investment banking industry and battery sector on Monday, Sebitchem is considering selling about half of the shares owned by Park Yong-jin, senior managing director at the company and the son of the founder Park Min-kyu, to a private equity fund.

It is likely that the sale will involve drag-along rights, including for the entire stake of the major shareholder Park, along with convertible bond issuance. It is also possible that the company’s management rights could be transferred to PEF.

“It is known that Sebitchem is pursuing the sale to secure funds for facility investment and tax payment related to business succession,” an industry official said. “However, it is difficult to cover the gift tax payment amount at the current level due to recent significant declines in stock prices.”

The market capitalization of Sebitchem is currently about 180 billion won ($130 million), and it is estimated by the securities industry that the sale price could reach between 70 to 80 billion won.

Sebitchem is not alone, with research suggesting that the EV battery ecosystem, considered a future growth engine, is struggling.

As the weak demand continues, companies unable to withstand operating losses and worsening financial structure are placing management rights up for sale. According to battery industry sources, SK ie technology Co. (SKIET), a manufacturer of separators for secondary batteries, recently contracted a few private equity funds for a management rights sale but the attempts were unsuccessful.

According to market research firm SNE Research, global EV sales are expected to grow by 16.6 percent on year to 16.41 million units in 2024. This is a significant decrease from the annual growth rates of 56.9 percent in 2022 and 33.5 percent in 2023.

The Korean EV market is in a similar position. According to car data portal CarIsYou, EV sales stood at 25,550 units in the first quarter of 2024, down 25.3 percent from the previous year’s 34,186 units. Key material companies that constitute the domestic battery ecosystem are also struggling to emerge from the downturn.

L&F Co., which swung to large-scale operating losses in 2023, and Korean cathode material companies will find it difficult to avoid poor performances in 2024. This is due to a sharp drop in prices for core minerals such as lithium, coupled with a decline in cathode material shipments due to weakened demand for EVs.

Recycling companies that were expected to experience explosive growth with the high demand for EVs are also unable to escape from the downturn. SungEel HiTech, the leading waste battery recycling company in Korea, posted an operating loss of 13.5 billion won in the first quarter of 2024, continuing a string of losses that began in the third quarter of 2023.

Experts advise that now is the time to establish a stable battery ecosystem and proactively explore new markets by securing international battery alliances.

“To secure price competitiveness, the Korean battery industry needs to vertically integrate not only downstream sectors like cell manufacturing but also upstream sectors such as core mineral materials in the long term,” a Korea Battery Industry Association official said.