By Joyce Lee and Se Young Lee
SEOUL (Reuters) - Samsung Group [SAGR.UL] will sell its chemicals businesses to local conglomerate Lotte Group for about 3 trillion won (1.7 billion pounds), the latest move to simplify its structure ahead of a transfer of power from its elderly chief to his heirs.
Samsung Group has been exiting non-core businesses since last year, when the company said it would sell stakes in four affiliates in the defence and chemical sectors to Hanwha Group, another local conglomerate.
"Samsung is slimming down under (heir apparent) Jay Y. Lee to raise competitiveness, and selling off whatever has little synergy with Samsung's core businesses - Samsung Electronics (L:0593xq) and its financial units," said Park Ju-gun, head of research firm CEO Score.
"Now it's really up to how Samsung competes in those core businesses, as well as biosimilars which has been flagged as a potential future growth engine."
Samsung SDI Co Ltd (KS:006400), which is selling a 90 percent stake in its chemical business to Lotte Chemical Corp (KS:011170) for 2.3 trillion won, said in a statement it will invest 2 trillion won in electric car batteries over five years.
Lotte Chemical said it will also buy a 465 billion won stake in Samsung Fine Chemicals (KS:004000) from various Samsung Group arms, including Samsung Electronics Co Ltd (KS:005930).
Lotte Chemical shares were down 10 percent by 0200 GMT as analysts questioned the acquisition price, although many agreed the purchase will expand its portfolio from mostly common plastic - such as those used in plastic bags - to value-added, speciality chemical products used in automobiles or home appliances.
Low oil prices have cut raw material prices for Lotte and boosted cash flows, with the company reporting an operating profit of 484 billion won in the July-to-September quarter, up 241 percent on the same period last year.
However, the company still has to fund existing investment commitments of nearly 4 trillion won by 2018, analysts said.
"It's not financially problematic. The company doesn't actually have any net debt, and EBITDA for 2015 is 2 trillion won. Still, it needs to carefully review whether the investment is not too aggressive," said Lee Eung-joo, an analyst at Shinhan Investment Corp.
Shares in Samsung Fine Chemicals fell 10.9 percent, and Samsung SDI reversed early gains to fall 5 percent after it announced the investment in electric car batteries. The wider market (KS11) was down 0.2 percent.