South Korea’s Lotte Chemical Corp. backed off from a bid it had made to acquire Axiall Corp. just about a week ago, citing unfavorable conditions at home and heated competition abroad.
The company said Friday it had decided to withdraw its latest bid to buy the largest North American producer of vinyl and polyethylene, embroiled in a proxy war with U.S. rival Westlake Chemical Corp. Lotte Chemical CEO Huh Soo-young said that the withdrawal is “regrettable,” but has to be done due to the “graveness of situation” that Lotte Group is faced with at the moment – it was raided by prosecutors on the same day on alleged accumulation of slush funds.
Axiall purportedly demanded a higher price for the buyout, leading the Korean firm drop the bid. An investment banking industry official explained that Axiall asked for more than Lotte Chemical initially offered claiming there is another potential third buyer. He added this would have soured the appetite of chemicals unit of Lotte.
However, the prosecution’s investigation over suspicious wrongdoings of the conglomerate that kicked off on the same day, seems to be the bigger reason behind Lotte Chemical’s retraction of the bid. The industry observed that the ongoing investigation would not only pose to the company public criticism, but also difficulties in financing its affiliate’s buyout of the U.S. firm estimated at 2 trillion won ($1.7 billion).
Lotte Chemical and Axiall have entered a joint venture to construct an ethane-based ethylene plant in Louisiana last December. Regardless of Lotte Chemical’s failed attempt to acquire Axiall instead of its U.S. rival Westlake Chemical, their partnership will remain intact.
By Chung Wook
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