To Beef up SSBR Business
Lotte Chemical has recently completed its due diligence on the Elastomer Division of Japan's JSR, which it is planning to acquire. Lotte Chemical has selected Nomura Securities as its lead manager for the acquisition.
JSR is the world's top-ranking company in photoresist used in the semiconductor production process. The Elastomer Division produces synthetic rubber, anode material binders for secondary batteries, and latex. JSR ranks fifth in the world market for solution styrene butadiene rubber (SSBR), which is used for high-functioning tires.
SSBR is used for eco-friendly tires because SSBR tires are less worn and emit less gas than ordinary products. JSR has SSBR production facilities with an annual production capacity of 170,000 tons in Japan, Thailand, and Hungary. Its annual production of synthetic rubber amounts to 600,000 tons. The Elastomer Division racked up 1.8 trillion won in sales in 2019.
Lotte Chemical established a joint venture (JV) with Versalis of Italy and has been operating 100,000-tons-per-year SSBR facilities for high-performance tires since 2017. However, the company has been losing tens of billions of won in this business every year. This is because it is not easy for new companies to enter the SSBR sector due to difficult quality certification procedures set by existing customers such as automakers. If Lotte Chemical acquires the Elastomer Division from JSR, it will be able to meet product standards required by global tire manufacturers at once, industry experts say.
As Lotte Chemical's current flagship products including butadiene (BD) and styrene monomer (SM) are used as raw materials for synthetic rubber, the company will be able to enjoy huge synergies by absorbing the Elastomer Division from JSR.
JSR is asking for a price of up to one trillion won for the Elastomer Division. However, industry experts say that the division suffered a loss in the aftermath of COVID-19 in 2020, a factor that will be reflected in price calculation.