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Lotte Chemical Corp., a petrochemical company under South Korean conglomerate Lotte Group that has been seeking to bolster its advanced material business, has joined a race to win Hitachi Chemical Co., the chemical unit of Japan’s Hitachi Ltd., against leading global private equity firms.
According to multiple sources from the investment banking industry on Friday, Lotte Chemical has submitted a preliminary bid earlier this month to buy Hitachi Chemical from its largest shareholder Hitachi with 51.2 percent stake ownership. Foreign media have reported that Hitachi has received preliminary bids for the majority stake in Hitachi Chemical by August 9.
Since Hitachi in May announced its plan to put its chemical unit up for sale, several global private equity firms, including U.S. investment firm Kohlberg Kravis Roberts (KKR) & Co Inc., Carlyle Group, and Bain Capital Private LP, are also known to have joined the race to own the company.
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With Hitachi Chemical, Lotte Chemical hopes to further bolster its advanced materials business through great synergy. Last week, Lotte Chemical’s board approved its merger with Lotte Advanced Materials Co., a move that will enhance the company’s competitiveness in the special materials sector thanks to the latter’s unrivaled technology and diverse products in the area.
With the merger with Lotte Advanced Materials that can produce 240,000 tons of polycarbonate (PC) per annum, Lotte Chemical’s annual PC capacity would be ramped up to 460,000 tons once it expands the annual PC production capacity of its plant in Yeosu, South Jeolla Province, to 220,000 tons by the second half of this year. The merger is expected to help Lotte Chemical become the world’s third-largest commercial PC producer in 2020.
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Lotte Chemical Yeosu plant in South Jeolla Province |
Hitachi Chemical, established in 1962, produces materials used in manufacturing semiconductors, displays, panels, and solar panels, as well as lithium-ion battery materials and carbon products and vehicle battery and components. The Japanese company is also a leading producer of epoxy resin, a material that protects semiconductor chips from dust and humidity. Korea relies heavily – 87.4 percent – on Japan for supply of epoxy resin.
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