Cheil Industries, Samsung’s chemicals and materials manufacturer will be no more.

Samsung SDI, a display panel and battery maker of Samsung Group, said Monday that it would be merging with Cheil Industries.

The merger, which will make Samsung SDI the surviving entity, comes as the group seeks to create a total materials and energy solutions company.

Cheil Industries, which began as a textile maker, will dissolve 60 years after it began operations.

Samsung SDI said in a statement that it expected the new company to achieve annual sales of 10 trillion won ($9.4 billion), and that it sought to increase sales to over 29 trillion won by 2020 by generating synergy between SDI’s lithium-ion batteries and Cheil’s materials.

The move will make Samsung SDI the group’s sixth-biggest affiliate.

“The acquisition is a strategic move (for both firms) to emerge as the world’s leading energy and materials company by converging the core competitiveness of the two,” Cheil Industries said in a regulatory filing.

The merged company will continue to be headed by both Samsung SDI CEO Park Sang-jin and Cheil Industries CEO Cho Nam-seong, a Cheil official said.

Park will run SDI’s existing business, while Cho will manage the materials division, the official noted.

The new company will seek approval from shareholders for the merger in May. The proposed deal will allow Cheil investors to receive 0.44 of an SDI share for each Cheil share they own. The group plans to begin operations in July.

Samsung Electronics is the biggest shareholder of Samsung SDI with a 20.38 percent stake in the world’s largest secondary cell manufacturer.

The National Pension Service, the state-run pension fund operator, is the biggest shareholder of Cheil Industries with an 11.63 percent stake in the materials maker, according to 2013 audit reports.

The merger was widely unexpected, as many observers expected changes at Cheil to be limited to the company name after it sold its fashion unit to Samsung Everland, a theme park operator, in September, saying it wanted to focus on electronic materials manufacturing.

Some, however, speculate that this move was in line with Samsung’s efforts to slim down its number of affiliates for greater efficiency.

Samsung Group has been restructuring its affiliates since last year as it sought to combine businesses that were closely related.

The merger of Samsung SDS, an information and communication technology service firm, and Samsung SNS, a network service and solution provider, was the group’s latest in-house M&A.

The restructuring was also seen as part of Samsung Group chairman Lee Kun-hee’s inheritance process for his children ― Jae-yong, Boo-jin and Seo-hyun.

Samsung Electronics vice chairman Lee Jae-yong will likely take over Samsung Group’s electronics and financial affiliates, while chairman Lee’s second daughter Lee Boo-jin is expected to head the hotel, construction and chemical businesses.

The chairman’s youngest daughter Seo-hyun, head of Samsung Everland’s fashion division, is expected to lead its fashion and media businesses.

By Kim Young-won (wone0102@heraldcorp.com)