Axiall Gains as Lotte Offer Raises Prospect of Bidding War

  • Proposal comes after Westlake Chemical mounted proxy fight
  • Lotte Group chemicals arm formed venture with Axiall in 2015

Axiall Corp. jumped the most in almost four months after South Korea’s Lotte Chemical Corp. made a takeover offer, raising the prospect of a bidding war for the U.S. maker of vinyl and polyethylene.

While Lotte didn’t disclose terms of the possible deal, the enterprise value may be close to $3.1 billion, according to a report Tuesday by RBC Capital Markets, which didn’t say where it got the information. That works out to $27.40 a share, compared with an offer of $23.35 from Westlake Chemical Corp., RBC said.

Axiall is casting about for suitors as Westlake tries to replace nine of the target company’s directors with its own nominees in a June 17 proxy contest. After Westlake’s unsolicited January bid was rejected, the company sweetened the offer in March. Axiall said the price was still too low and the two sides blame each other for ending talks.

“The acquisition price may go higher as Lotte has to compete with Westlake,” said Lee Ji Yeon, an analyst at IBK Securities. “In terms of diversifying its business, it’s good news for Lotte.”

For previous coverage of the Axiall-Westlake takeover battle, click here.

Axiall climbed 8.8 percent to close at $25.35 in New York, its biggest gain since Feb. 16. Westlake rose 1.4 percent to $46.27. Lotte Chemical fell 3.5 percent to close at 260,500 won ($224.03) in Seoul.

The “board has not made any decisions concerning the Lotte offer,” according to an Axiall letter to employees contained in a corporate filing. The company didn’t include any details of the proposal.

Westlake and Axial didn’t return requests for comment.

Joint Venture

Lotte formed a venture with Axiall last year to build a plant for making ethylene in the U.S., with production to start in 2018. The South Korean company submitted a plan to acquire Atlanta-based Axiall on June 3, according to a regulatory filing.

The petrochemical business of South Korea’s Lotte conglomerate is widening its product lines and seeking growth outside the country after announcing the purchase of Samsung Group’s chemicals business for about $2.5 billion.

A deal for more than $1.6 billion would be Lotte Chemical’s largest overseas. The company, formerly named Honam Petrochemical Corp., bought Malaysia-based Titan Chemicals Corp. in a 3.5 billion Malaysian ringgit ($1.1 billion) deal based on enterprise value.

Axiall would expand Lotte Chemical’s products to include polyvinyl chloride and chloro-alkali, while helping secure a foothold in the U.S. market, the South Korean company said Tuesday in a statement.

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