Lotte Chemical to sell Pakistani unit to Lucky Core for $155 mn

Lotte Chemical to sell Pakistani unit to Lucky Core for $155 mn [Source : LCPL]

Lotte Chemical Corp. will sell its unit in Pakistan to a local chemical company, a move that will help the South Korean company raise funds to complete the 2.7 trillion won ($2.2 billion) purchase of copper foil manufacturer Iljin Materials in February.

According to multiple sources from the investment bank industry on Monday, Lotte Chemical has decided to sell all of its 75 percent stake in Lotte Chemical Pakistan Ltd. (LCPL) to Lucky Core Industries Ltd., formerly ICI Pakistan Ltd., for 192.3 billion won.

The board of Lotte Chemical approved the sale in a meeting last week. The two parties plan to sign a stock purchase agreement on Jan. 26 and complete the sale by the end of this year after review by the Pakistani anti-trust regulator.

Lotte Chemical acquired LCPL from the Netherlands-based paint company AkzoNobel for 14.7 billion won in 2009. LCPL is a world-class supplier of purified terephthalic acid (PTA), an essential raw material used in the polyester industry. The company raised 48.8 billion won in operating income in 2021.

Lotte Chemical decided to sell LCPL 10 years after its purchase at a 13 times higher price. The company’s shares soared 1.96 percent on Monday to finish at 182,500 won.

The disposal comes as Lotte Chemical has been engaged in efforts to close down non-core businesses including overseas units for efficiency.

“We decided on the sale as we judged it does not correspond with our long-term vision to expand high value-added specialty,” said an unnamed official from Lotte Chemical.

Lotte Group had been in talks with Pakistani petrochemical company Novatex Ltd. until late last year for the sale of LCPL. Novatex announced that it submitted a proposal for the acquisition. Progress, however, has been slow as Pakistani authorities were wary of capital outflow amid the global interest rate hike environment and tumbling currency against the U.S. dollar. The talks fell through earlier this month.

Lotte Chemical sought a new buyer and turned quickly to Lucky Core Industries.

The sale is expected to help Lotte Chemical raise funds to complete its acquisition of Iljin Materials by the end of February.

Lotte Group has been under pressure to pay 2.7 trillion won in acquisition funds to buy Iljin Materials. Concerns rose about the conglomerate’s financing capacity following decisions last year to raise over 1 trillion won in funds by issuing new shares.

Lotte Group units including Lotte Property & Development joined hands with Meritz Securities to create a 1.5 trillion won fund to support Lotte Engineering & Construction, easing liquidity concerns at the builders’ parent Lotte Chemical. Lotte E&C paid back 500 billion won in loans it borrowed from Lotte Chemical ahead of schedule in January.