Lotte Said to Explore Over $500 Million IPO for Malaysia Arm

  • Petrochemicals business could list in second half of 2016
  • Deal could help Lotte Chemical raise funds for new ventures

Lotte Chemical Corp., the South Korean plastics manufacturer, is exploring an initial public offering of its Malaysian petrochemicals arm that could raise more than $500 million, people with knowledge of the matter said. 

The unit Lotte Chemical Titan Holding Sdn. could sell stock in Kuala Lumpur as soon as the second half of this year, the people said, asking not to be identified as the information is private. Shares of Lotte Chemical Corp. jumped 3.4 percent at 2:53 p.m. Wednesday in Seoul to the highest level in more than two months.

Malaysia has hosted only one IPO of more than $500 million in the past two years, the $885 million share sale from power producer Malakoff Corp. in April 2015, according to data compiled by Bloomberg. First-time share sales in the country raised $1.28 billion last year, compared to $1.25 billion in 2014, the data show.

“Through listing Titan, Lotte could resolve the burden of its cash shortage,” Hwang Kyu-won, an analyst at Yuanta Securities Korea Co., said by phone Wednesday. “Lotte Chemical is now pursuing several businesses, such as the ethane cracker business in the U.S., and it also bought Samsung’s chemical business last year.”

Lotte Chemical hasn’t yet decided whether to proceed with a listing of the Malaysian unit, and details such as the fundraising amount haven’t been set, the people said. 

Family Feud

A Kuala Lumpur-based spokesman for Lotte Chemical Titan didn’t respond to phone calls and an e-mail seeking comment, while Lotte Group said in an e-mailed statement that it can’t 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 3 trillion won ($2.5 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 Co. 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 Corp., bought Titan Chemicals Corp. in a 2010 all-cash deal valued at $1.25 billion and delisted the company the next year.

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