Fashion
Lotte declined to reveal the exact terms of its offer, but analysts said the bid would top Westlake’s $3.1bn approach. The counter offer could prompt Westlake to raise its bid after Axiall, a maker of polyethylene products, rejected the approach in April, the analysts added.
“Lotte Chemical will be seen as a white knight for Axiall,” Park Young-hoon, an analyst at LIG Investment & Securities, told Reuters.
If successful, Lotte Chemical would use the acquisition of Atlanta-based Axiall to diversify its product portfolio and secure a foothold in the US.
Axiall said it has been in talks with several potential buyers after its rejection of the first approach prompted Westlake to launch a proxy fight to oust Axiall’s board.
However, investors were unimpressed by Tuesday’s counter-offer, driving Lotte Chemical shares down 3.5 per cent to Won260,500 — their lowest in more than four months — while the Kospi benchmark index closed up 1.3 per cent.
“The deal could be positive for Lotte in terms of securing a stepping stone in the US, but its shares were weighed down by concerns that the acquisition price could be much higher than expected,” said Lee Ji-Yeon, analyst at IBK Securities.
The deal would be Lotte Chemical’s largest overseas acquisition. The company, formerly named Honam Petrochemical, took over Malaysia’s Titan Chemicals for Won1.5tn in 2010.
South Korean chemicals makers are trying build scale to compete better with lower-cost Chinese rivals, with Lotte Chemical buying Samsung Group’s chemicals business for $2.5bn last year.
South Korean petrochemical companies posted record profits last year as lower oil prices drove down material costs. Lotte Chemical reported a Won990.7bn net profit in 2015 on sales of Won11.7tn. The company said it could afford the cross-border deal, with its annual cash flow reaching $2bn.
Almost devoid of hydrocarbon deposits, South Korea relies on oil imports but is also a big exporter of petroleum and petrochemical products. More than half of its processed output goes to markets including China, Japan and the US.
Separately, South Korea’s Hanwha Chemical said on Tuesday its Hanwha Advanced Materials unit had submitted a letter of intent to buy US automotive materials supplier Continental Structural Plastics. The group declined to give the details of the offer but the Maeil Business Newspaper said the deal could fetch $600m.
Axiall’s New York-traded shares, which have lost one-third of their value over the past year, were down 2.5 per cent on Monday at $23.30, before news of Lotte’s approach was made public.
