Lotte Chemical eyes listing of Malaysian arm

KUALA LUMPUR • Lotte Chemical, the South Korean plastics manufacturer, is exploring an initial public offering (IPO) of its Malaysian petrochemicals arm that could raise more than US$500 million (S$720 million), people with knowledge of the matter said. 

The unit, Lotte Chemical Titan Holding, could sell stock in Kuala Lumpur as soon as the second half of this year, they said, asking not to be identified as the information is private.

Shares of Lotte Chemical jumped 3.4 per cent during day trade in Seoul yesterday to the highest level in more than two months.

Malaysia has hosted only one IPO of more than US$500 million in the past two years, the US$885 million share sale from power producer Malakoff in April last year, according to data compiled by Bloomberg.

FUND SOLUTION

Through listing Titan, Lotte could resolve the burden of its cash shortage.

MR HWANG KYU WON, an analyst at Yuanta Securities Korea

First-time share sales in the country raised US$1.28 billion last year, compared to US$1.25 billion in 2014, the data shows.

"Through listing Titan, Lotte could resolve the burden of its cash shortage," Mr Hwang Kyu Won, an analyst at Yuanta Securities Korea, said by phone.

"Lotte Chemical is now pursuing several businesses, such as the ethane cracker business in the United States, and it also bought Samsung's chemical business last year."

Lotte Chemical has not yet decided whether to proceed with a listing of the Malaysian unit, and details such as the fund-raising amount have not been set, sources said.  A Kuala Lumpur-based spokesman for Lotte Chemical Titan did not respond to phone calls and an e-mail seeking comment, while Lotte Group said in an e-mailed statement that it cannot verify any potential plans for the Malaysian unit to pursue an IPO.

Lotte Chemical agreed in October to buy Samsung Group's chemicals businesses for about three trillion won (S$3.5 billion).

It is part of Lotte Group, the South Korean retail giant, which is also planning a listing of its duty-free arm Hotel Lotte that could become one of the biggest public offerings the nation has seen.

Any deal would come during turbulent times for the conglomerate. A power struggle between Lotte Group chairman Shin Dong Bin and his elder brother has gripped national attention for months, as disputes between family members at corporate dynasties, known locally as the chaebol, are rarely displayed in public.

Plastics produced by Lotte Chemical Titan include polyethylene, used in shopping bags and toys, as well as polypropylene, which can be found in battery casings and car parts.

The company also makes olefins that are part of the manufacturing process for rubbers and detergents.

Lotte Chemical, when it was called Honam Petrochemical, bought Titan Chemicals in a 2010 all-cash deal valued at US$1.25 billion and delisted the company the next year.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on January 07, 2016, with the headline 'Lotte Chemical eyes listing of Malaysian arm'. Print Edition | Subscribe