Lotte Chem’s sale of Pakistani PTA unit falls through

Lotte Chemical Corp.'s plan to sell off its Pakistani PTA subsidiary to local chemicals producer Lucky Core Industries Ltd. has collapsed, a year after the two parties had agreed on the sale.

Karachi, Pakistan-based Lucky Core Industries reported to Pakistan Stock Exchange Ltd. in a regulatory filing on Friday last week that its wholly owned subsidiary Lucky Core Ventures Ltd. has terminated the share purchase agreement signed with Lotte Chemical on Jan. 26, 2023 to buy a 75.01% stake in Lotte Chemical Pakistan Ltd. (LCPL).

The company said it could not meet the conditions required to complete the deal within the agreed time, without elaborating further.

Lotte Chemical also called off the deal in a regulatory filing on Monday, confirming that Lucky Core has terminated the deal due to lingering regulatory and political uncertainties in Pakistan, which were blamed for the delay in signing their binding contract.  

With the deal's collapse, Lotte Chemical’s plan to reorganize its business portfolio with fresh funds from the LCPL sale has hit a snag.   

The Korean chemicals giant had hoped to raise about 192.4 billion won ($145.6 million) from the sale of its Pakistani subsidiary and then use the proceeds to reinforce its value-added petrochemical products-producing business and foster a new growth driver in the eco-friendly materials business.          

DELAY IN BUSINESS REORGANIZATION

Lotte Chemical’s Pakistani subsidiary mainly produces purified terephthalic acid (PTA), an organic compound that is the main raw material for polyethylene terephthalate (PET), coatings, unsaturated resins and other polyester fibers.

The Korean petrochemical company acquired LCPL in 2009 for about 14.7 billion won, and the PTA subsidiary recorded 48.8 billion won in operating profit in 2021.

But Lotte Chemical decided to sell LCPL because the business did not conform to its new vision of transforming into an eco-friendly materials company with greater focus on polyethylene (PE), polypropylene (PP), polyethylene terephthalate (PET), lithium-ion battery materials and hydrogen.

In 2022, the company announced a plan to rake in 50 trillion won in sales by 2030, of which about 30 trillion won, or 60% of its total sales target, would be generated from its high-value-added specialty and green materials businesses.

The company has been seeking to divest non-core businesses to focus on more profitable specialty products. 

Had it succeeded in selling LCPL, Lotte Chemical would have fully ceased PTA production. Lotte Chemical pulled the plug on its PTA plant in Ulsan, Korea, in the second half of 2020.

Write to Sang Hoon Sung at uphoon@hankyung.com
Sookyung Seo edited this article.