Lotte Chemical and Yeochun NCC submitted a business restructuring plan to merge the companies to the government. This is the second petrochemical industry restructuring plan, following the Lotte Chemical–HD Hyundai Oilbank tie-up in Nov. last year. Yeochun NCC is currently owned 50-50 by Hanwha Solutions and DL Chemical. The gist of the plan is that, through this restructuring, the three corporations, including Lotte Chemical, will jointly control Yeochun NCC.
◇ Korea Fair Trade Commission (FTC) begins pre-merger review
The Korea Fair Trade Commission said on the 20th that it had received a pre-merger review application for the Lotte Chemical–Yeochun NCC corporate combination and begun its review. When a company with an asset or sales size of 300 billion won or more, such as Lotte Chemical, engages in a corporate combination, it must obtain the FTC's approval.
According to the pre-merger application, Lotte Chemical will conduct a physical spin-off of certain business units, including the Yeosu plant. The newly established entity from the split will be merged with Yeochun NCC. At the same time, Hanwha Solutions and DL Chemical will make in-kind contributions of parts of the Yeosu plant to Yeochun NCC. Lotte Chemical will additionally acquire new shares of Yeochun NCC, resulting in Lotte Chemical, Hanwha Solutions, and DL Chemical each holding 1/3 equity in Yeochun NCC.
Lotte Chemical currently has petrochemical production facilities centered on a naphtha cracking center within the Yeosu petrochemical complex. In contrast, Hanwha Solutions and DL Chemical produce downstream petrochemical products such as synthetic resins without such facilities. If this combination is approved by the FTC, production of naphtha cracking facilities and synthetic resin products in the Yeosu area is expected to be integrated.
◇ If approved by the Ministry of Trade and Industry (MOTI), tax benefits will follow
On this day, Lotte Chemical, Hanwha Solutions, DL Chemical, and Yeochun NCC submitted a business restructuring plan to the Ministry of Trade, Industry and Resources. The business restructuring plan submitted to the MOTI also contains the four corporations' combination structure, similar to the pre-merger application received by the FTC.
The MOTI plans to convene a business restructuring plan review committee to closely examine the feasibility of achieving the plan's goals. If it passes this review, the four corporations can receive a tailored corporate support package that includes not only tax benefits but also financing, research and development (R&D), cost reductions, and regulatory easing.
Minister Kim Jung-kwan of the MOTI said, "If this business restructuring succeeds, it will serve as an opportunity to improve efficiency and shift to a high value-added structure," adding, "We will do our best to support corporations' naphtha procurement to help petrochemical corporations struggling due to the Middle East situation and to stabilize the industrial supply chain."