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Sigma-Aldrich to Form Korean JV

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SAFC Hitech Ltd. a wholly owned subsidiary of Sigma-Aldrich Corporation , announced that it has agreed to create a 50:50 joint venture (JV) with Korean-based Soulbrain Co. Ltd. The joint venture, known as Soulbrain Sigma-Aldrich Ltd, is expected to be finalized in the first quarter of 2013.

Through the JV, Sigma-Aldrich seeks to foray into the lucrative Korean market and focus on developing and commercializing advanced metal organic precursor technologies that are used in the semiconductor and LED markets.

Per the JV agreement, Soulbrain will provide certain electronic material product know-how, intellectual property (IP), and development personnel to the venture. SAFC Hitech Ltd., on the other hand, will provide the manufacturing and product competency and IP for metal organic compounds.

All the products manufactured or acquired by the newly formed JV will be distributed exclusively by Soulbrain in the Korean market. However, SAFC Hitech Ltd or its affiliates will distribute the JV products outside Korea.

Soulbrain is a publicly traded specialty chemical company headquartered in Pangyo, Korea and serves the flat panel display, semiconductor and electronic materials market. By collaborating with Soulbrain, Sigma-Aldrich will expand its presence in the Asia Pacific region. Sigma-Aldrich will also be able to cater to a bigger customer base through Soulbrain's established technical competencies, infrastructure and customer relationships.

Sigma-Aldrich is a leading life science and advanced technology company. Last month, the company also signed an agreement with Seoul, South Korea-based CrystalGenomics to develop active pharmaceutical ingredients (API) for next-generation non-steroidal anti-inflammatory drugs (NSAID).

Sigma-Aldrich released its third quarter 2012 results in October. The company posted adjusted earnings (excluding restructuring charges) of 94 cents per share for the quarter, below the year-ago earnings of 96 cents. The results were in line with the Zacks Consensus Estimate.

Profit, as reported, fell roughly 4% year over year to $112 million or 92 cents per share in the quarter from $117 million or 95 cents a year ago. Unfavorable currency reduced earnings per share by 11 cents.

Revenues edged up 2% year over year to $639 million in the quarter, but trailed the Zacks Consensus Estimate of $661 million. Acquisitions added 6% to the revenue growth while foreign exchange swings had a negative impact of 6%.

Sigma-Aldrich expects organic growth to be 3% in 2012, within its earlier low-to-mid single digits growth expectation. The acquisitions of BioReliance and Research Organics are expected to boost sales by 6%. However, unfavorable currency is expected to reduce sales by 3%.

Sigma-Aldrich, a close peer of Bayer AG (BAYRY - Free Report) , maintains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating. We currently have a long-term (more than 6 months) Neutral recommendation on the shares of the company.

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