Korea’s Fair Trade Commission (FTC) has conditionally approved HD Hyundai Chemical’s merger with Lotte Daesan Petrochemical, it is reported. Under the integration, the two companies will each inject 600 billion won, for a combined 1.2 trillion won capital increase, and Lotte Chemical’s naphtha cracking center (NCC) at its Daesan plant will be shut down.
The integration will proceed with HD Hyundai Chemical absorbing Lotte Daesan Petrochemical effective September 1, with 60.8 million new shares to be issued, it is reported. The post-merger equity structure will shift from the existing 60:40 split to a 50:50 split. Lotte Chemical’s Daesan NCC, with an annual ethylene capacity of 1.1 million tons, will be shut down as part of the integration, it is reported. The merged entity aims to consolidate the facilities previously operated separately by the two companies within the Daesan petrochemical complex into a single production system to improve operational efficiency, it is reported.
The FTC attached conditions to its approval, requiring that domestic prices for low-density polyethylene (LDPE) and ethylene vinyl acetate (EVA) be linked to export prices for five years, that the companies maintain domestic supply obligations for existing products, and that they refrain from sharing competitively sensitive information, it is reported. This is understood as a measure to minimize the impact of the integration’s expanded market power on domestic downstream companies.
Implications for Korea’s Industry
As facility integration and restructuring to resolve oversupply in Korea’s petrochemical industry increasingly takes the form of mergers between major petrochemical companies, this could also influence similar integration moves by other companies going forward, it is reported.
The actual timing of the NCC shutdown following the September 1 merger completion, and whether the price-linkage and supply obligation conditions imposed by the FTC are fulfilled, are cited as points to watch.