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Lotte Chemical makes bid for Axiall Corp.

June 7, 2016
Chemical Value Chain

Lotte Chemical Corp., an affiliate of South Korea’s fifth-largest conglomerate, has submitted a bid for Axiall Corp., stepping into a messy proxy fight for control of the Atlanta-based chemicals company.

Lotte Chemical’s bid for Axiall, disclosed in a regulatory filing Tuesday morning in Seoul, comes after Axiall this year rejected two unsolicited bids from Houston-based Westlake Chemical Corp. that it called “opportunistic and inadequate.”

Westlake has launched a proxy fight, and is urging shareholders to approve its slate of candidates to replace the board of Axiall at Axiall’s annual shareholders meeting on June 17.

Spokesmen for Axiall and Westlake couldn’t immediately be reached for comment.

Westlake’s sweetened offer for Axiall totals $3.1 billion, including the assumption of $1.5 billion in debt. Westlake initially bid for Axiall in January after a bruising 2015 that saw Axiall’s share price tumble by 64% amid falling sales and profits.

Westlake’s initial bid of $20 per share in January was more than double Axiall’s share price of $9.60 at the time, and it pushed the offer up to $23.35 per share after Axiall’s initial refusal.

The size of Lotte Chemical’s bid wasn’t disclosed in the regulatory filing, but a spokeswoman for the Lotte Group said only that the company was offering more than 3 trillion Korean won ($2.6 billion) for Axiall, whose market capitalization was $1.6 billion, based on Monday’s closing price in New York. Shares of Axiall jumped 7% in after-hours trading to $24.93 per share.

Lotte Chemical’s bid for Axiall comes after the two companies in December announced the construction of two chemical plants in Louisiana with a total investment of $3 billion.

The bid comes at a delicate time for the Lotte conglomerate, which has suffered from turmoil in the past year after Shin Dong-bin, the second son of Lotte’s nonagenarian founder, ousted his older brother and heir apparent in a board coup.

Last month, Mr. Shin filed for an initial public offering of Hotel Lotte Co., the centerpiece of a business empire ranging from chemicals to chewing gum. If Hotel Lotte prices at the top end of its indicated range, it would become South Korea’s most valuable IPO ever.

But last week, South Korean authorities investigated the offices of Hotel Lotte’s lucrative duty-free shopping business, and the home of Shin Young-ja, a sister of Mr. Shin and a top executive at the conglomerate. South Korean media reports said prosecutors are looking into whether a local cosmetics company paid bribes in exchange for floor space at Lotte retail outlets.

The Seoul Central District Prosecutors’ office declined to confirm any details of the investigation. Lotte declined to comment on the probe but said it has delayed the investor roadshow for the Hotel Lotte IPO because of the investigation. Hotel Lotte derives the majority of its sales and profits from its duty-free business.

Shares in Lotte Chemical dropped 4.3% on Tuesday in Seoul after the company’s bid was disclosed, their lowest level since January.

By Jonathan Cheng

Source: Wall Street Journal

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