Lotte seeks to sell Pakistan arm for over 10 times return

South Korea’s Lotte Chemical Corp. has decided to put its entire stake in Pakistan-based LCPL up for sale, which may sell for up to 210 billion won ($160 million), or more than 10 times its acquisition price, according to a company official on Tuesday.

The Korean petrochemical company acquired LCPL, which stands for Lotte Chemical Pakistan Ltd., for 14.7 billion won ($11 million) from the Netherlands-based AkzoNobel back in 2009.

LCPL manufactures purified terephthalic acid (PTA), an intermediary product between synthetic fiber and plastic bottles.

Based on LCPL's market cap of 213 billion won on Pakistan's stock market, Lotte’s 75% stake is estimated at 183 billion-210 billion won ($140 million-$160 million), including a management premium.

The decision to put the Pakistani unit up for grabs comes after Lotte Group in 2020 ceased domestic PTA production at its Ulsan plant, 310 km south of Seoul.

Lotte Chemical is shifting into eco-friendly businesses such as materials used in rechargeable batteries and smartphones, and hydrogen power generation. Its parent group chose biopharmaceuticals and mobility services as its new growth pillars.

Two years after the acquisition, Lotte recouped its investment through dividend income of 20 billion won from the Pakistani company.

The Lotte official said that its expected sale of LCPL would improve its management efficiency.

Thanks to its post-acquisition facility upgrades, LCPL earned 32.6 billion won in net profit on sales of 472.1 billion won last year. Over the past three years, its net profit hovered between 15 billion and 50 billion won per year.

Moreover, Lotte Group made bolt-on acquisitions of Pakistani companies: Lotte Confectionery Co. purchased Kolson, a food company; and Lotte Chilsung Beverage Co. bought a majority stake in Akhtar Beverages.

Pakistan has served as Lotte Group’s strategic hub to expand into South Asia. But the country’s economic crisis prompted Lotte Group to put the Pakistani unit on the market.

Pakistan’s economic crisis is deepening as the country is having a hard time repaying massive loans it borrowed from China to fund its large-scale infrastructure projects.

To revive its economy, the Pakistani government agreed on a $6 billion bailout package from the International Monetary Fund on the condition of implementing harsh restructuring plans.

Write to Ik-Hwan Kim at lovepen@hankyung.com
Yeonhee Kim edited this article.