ISLAMABAD: South Korean multinational Lotte Chemical Corporation has agreed to sell its entire 75.01% stake, the single largest one in Lotte Chemical Pakistan (LOTCHEM) to Lucky Core Industries (LCI). The deal will cost $156 million, approximately 192.4 billion South Korean Won (KRW).
Lotte Chemical Corporation is the parent company of LOTCHEM Pakistan and holds 75.01% shareholding in the subsidiary. This entire shareholding is being sold to Lucky Core Industries (LCI).
The announcement was first made by the chemical giant, and subsequently announced to the Pakistan Stock Exchange (PSX) by LOTCHEM and LCI on Monday.
The notice by LOTCHEM Pakistan read, “The Board of Directors (BoD) of Lotte Chemical Corporation, South Korea (“LCC Korea”), the majority (75.01%) shareholder of Lotte Chemical Pakistan Limited (“Company”) has approved and authorised the sale of all of the company’s shares held by LCC Korea (i.e. 75.01%) for the purpose of optimisation of LCC Korea’s business portfolio, subject to execution of a share purchase agreement (“Proposed divestment”).”
The completion of the deal will be subject to the required approvals and regulations. According to the announcement made by Lotte Korea, the sales and purchase agreement (SPA) will be signed on January 26. Curiously, however, the date of the SPA has not been disclosed by either LOTCHEM or LCI.
LCI, in their notification to the PSX, also announced that they have received confirmation from the BoD of Lotte Chemical Corporation about their approval for the sale of shares (1,135,860,105 shares), which will be subject to signing of share purchase agreement and other transactionary approvals.
However, previously LCI was not the only company in the race for the acquisition. Just last week, Novatex (Private) Limited, a local company, withdrew its offer to acquire the 75.01% shareholding in LOTCHEM because the parties were unable to agree on the terms of the transaction. This paved the way for LCI to acquire the chemical company.
The LCI, formerly known as ICI Pakistan Holding Limited (ICI) until December 23, 2022, made the public announcement to acquire 75.01% shareholding of LOTCHEM last year on July 22 through their manager of the offer, Optimus Capital Management (Private) Limited. On October 7, 2022, the BoD of LCI authorised the company to submit a binding bid for the acquisition. Lucky Cement Limited is the parent company of LCI.
Why is Lotte Korea selling Lotte Pakistan?
As previously stated, the chemical giant wants to sell off its Pakistani subsidiary in order to streamline its global business operations with a focus on advanced materials and eco-friendly products.
LOTCHEM Pakistan engages in the production of purified terephthalic acid (PTA). This PTA is widely used to make Polyethylene terephthalate (PET) bottles and other polymer products, such as fibres, resins and thin films. Lotte Korea in 2020 closed its own domestic PTA production line in Ulsan, South Korea, to become more ecologically responsible. The sale of the Pakistani unit means that the chemical giant will no longer engage in PTA production.
The South Korean corporation wants to consolidate its operations by focusing on cutting-edge materials and ecologically responsible goods. The proceeds from the sale are predicted to strengthen the company’s advanced materials division, improve the development of environmentally friendly synthetic chemicals, and modernise the current chemical products used as plastics’ feedstock.
Lotte Chemical, the chemical unit of South Korean retail giant Lotte Group, aims to achieve 50 trillion KRW in sales in 2030, with about 30 trillion KRW into be generated from high value-added specialty products and eco-friendly materials.
In the PSX, LOTCHEM’s shares were the third highest during the Monday trading session with a volume of over 7.65 million shares. The share price opened at Rs 27.55 and closed at Rs 28.03, an increase of 1.74% during the day.
Lotte Chemical Pakistan
LOTCHEM was incorporated in Pakistan on 30 May 1998. The principal activity of the company is the manufacture and sale of the PTA mentioned above.
Lotte, the South Korean conglomerate, acquired the majority shareholdings in Pakistan PTA Limited (PPTA) in September 2009. Subsequently, the name of the company was changed to Lotte Chemical Pakistan Ltd.
The company has the capacity to produce 520,000 tonnes of PTA annually through its state-of-the-art plant located at Port Qasim, Karachi. The plant at the port was built using ICI’s state-of-the-art technology when it was commissioned in 1998. It produces PTA, an essential raw material for Pakistan’s textile and PET packaging industries, and forms the backbone of the polyester chain, including Polyester Staple Fibre, Filament Yarn and PET (bottle grade) resin.
In addition to its own manufacturing facilities, the company has helped create a large infrastructure network at the Port Qasim vicinity, which includes a chemical jetty, raw water pipeline and manufacture of industrial gases through third-party contracts.
