(Yicai Global) June 10 -- Shares in Ningbo Shanshan, a Chinese apparel and new-energy firm, hit the 10 percent limit up this morning after it revealed plans to buy 70 percent of LG Chem’s liquid-crystal display polarizer business on the Chinese mainland and in Taiwan and South Korea.

Shanshan stock [SHA:600884] opened at the CNY13.76 (USD1.95) limit and despite a slight blip were still there as of 10.26 a.m.

The Zhejiang province-based firm will pay USD770 for the regional business, which LG Chem will transfer to a newly founded subsidiary in China, Shanshan said in a statement yesterday. LG Chem will hold the remainder of the unit, which will purchase intellectual property rights from LG Chem, though Shanshan will gradually acquire this 30 percent over the next three years.

Shanshan plans to leverage LG Chem’s leading position in the sector to expand its market share, it added. The firm will raise CNY3.1 billion (USD438 million) from its controlling shareholder Shanshan Group and related parties in a private placement to fund the deal, and pay the remainder itself.

The target had net assets worth nearly KRW760 billion (USD633 million) at the end of the first quarter. It made over KRW245 billion in profit during the first three months, on operating income of KRW16.7 trillion (USD13.9 billion).

LG Chem is South Korea’s largest chemical company and is controlled by LG Group. It set up its LCD polarizer business in 1997 and supplies to the likes of Sharp, BOE and LG Display. The firm dominates the polarizer manufacturing industry alongside Sumitomo Chemical and Nitto Denko. It had a 25 percent share of the market in 2018.

Ningbo Shanshan began as a clothing manufacturer and listed in 1999, but has moved into the new-energy sector and mostly focuses on lithium battery materials, which have become a major profit contributor in recent years. It made CYN270 million (USD38.2 million) last year, down nearly 76 percent as raw material prices rose and subsidies for new-energy vehicles declined.

Editor: James Boynton