South Korea's Lotte Chem, Hanwha Chem target U.S. buys in growth pursuit

Tue Jun 7, 2016 4:23am EDT
 
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By Hyunjoo Jin and Joyce Lee

SEOUL (Reuters) - Lotte Chemical Corp is bidding for U.S. chemicals maker Axiall Corp and Hanwha Chemical Corp flagged a likely U.S. deal, as cash-flush South Korean chemicals firms target acquisitions in a hunt for new revenue streams.

Asian chemicals firms have seen their profits surge in the last couple of years as the slide in oil prices has slashed their input costs, leaving them with surpluses to invest.

Lotte Chemical, which plans to produce ethylene in the United States in a joint venture with Axiall, announced the initial offer on Tuesday, coming in as a potential white knight for the $1.6 billion firm that is resisting a takeover attempt by Westlake Chemical Corp.

Lotte Chemical did not provide any terms.

Separately, Hanwha Chemical said its unit had submitted a letter of intent to buy U.S.-based automotive materials supplier Continental Structural Plastics, in a deal media reports said could fetch $600 million.

In March, crosstown rival LG Chem said it was looking at more acquisitions of agriculture-chemical firms after its $430 million purchase of Dongbu Farm Hannong.

"As they have seen cash swelling in the past couple of years Korean chemicals firms are now on an expansion mode in search of new growth engines," said Han Seung-je, an analyst at Dongbu Securities.

Lotte Chemical, part of hotel-to-retail conglomerate Lotte Group, said Axiall generated at least 2 trillion won ($1.72 billion) in cash per year, and that it was considering various methods to finance the acquisition, including cash.   Continued...