Lotte Group’s Core Business

Lotte Chemical has submitted a plan to buy U.S.-based chemicals firm Axiall.
Lotte Chemical has submitted a plan to buy U.S.-based chemicals firm Axiall.

 

Lotte Group, which has been focusing on domestic demand, including shopping, is rapidly expanding to B2B. Based on Lotte Chemical, which has recently emerged as a new cash cow in the group, it plans to secure an economy of scale and increase export.

Lotte Chemical announced on June 7 that it has submitted a plan to buy U.S.-based chemicals firm Axiall. The takeover price of Axiall, which has annual sales of 4 trillion won (US$3.45 billion), is estimated at 3 trillion won (US$2.59 billion).

Once Lotte Chemical succeeds in the acquisition, it will become the world’s 12th largest chemicals company. The company ranked 26th in the 2014 global top 50 chemical company rankings of the C&EN, while LG Chem took 13th place in the list. The C&EN is a chemical industry magazine published by the American Chemical Society.

If successful, the acquisition would enable Lotte Chemical to diversify its business portfolio beyond olefins and aromatics production to include derivatives and expand its business in North America.

Such an aggressive merger and acquisition (M&A) movement is fully supported by Lotte Group Chairman Shin Dong-bin, according to industry sources. Shin, who first participated in management of Korean Lotte Group at Lotte Chemical in 1990, said, “We should expand the proportion of petrochemical and raw material businesses, which are our future growth engines, to the level of distribution,“ during the ceremony marking the completion of the Surgil petrochemical complex in Uzbekistan on May 21.

In fact, Lotte Group started chemical business after taking over Honam Petrochemical (current Lotte Chemical) in 1979. Starting with the acquisition of Hyundai Petrochemicals and KP Chemical in the 2000s, the group also succeeded in M&A of Artenius in the UK in 2009 and Titan Chemical Corp. in Malaysia in 2010. In addition, it recently took over Samsung Fine Chemicals (current Lotte Fine Chemical), Samsung BP Chemicals (current Lotte BP Chemicals) and SDI Chemical (current LOTTE Advanced Materials), increasing the business size further.

With active support by Shin, Lotte Chemical has now become a major subsidiary of the group. Lotte Chemical posted 473.6 billion won (US$409.05 million) in operating profits in the first quarter. It is more than double the sales of Lotte Shopping (208.1 billion won or US$179.74 million). 

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