Lotte Group Unveils Plans to Sell Lotte Chemical Titan in Malaysia

Lotte Chemical Corp., South Korea's second-largest petrochemical company, has initiated the process of divesting its Malaysian subsidiary, Lotte Chemical Titan Holdings. Simultaneously, its competitor, LG Chem Ltd., is in talks with Kuwait Petroleum Corp. regarding the potential sale of a stake in a domestic naphtha cracking facility. The combined value of these potential transactions is estimated at $1.3 billion, with approximately $600 million attributed to Lotte Chemical's Malaysian unit.

Both companies are strategically reducing their petrochemical operations to focus on high-value, growth-oriented markets, such as materials for batteries, specialty chemicals, and renewable energy. This strategic shift is prompted by increasing competition from Chinese rivals, compounded by oversupply and decreasing demand in the industry.

Lotte Chemical is currently proactively pursuing potential buyers for Lotte Chemical Titan (LC Titan), actively engaging with both domestic and international companies, as well as global private equity firms via investment banks. LC Titan's sale encompasses all outstanding shares traded on the Malaysian stock market, amounting to a 74.7% stake, valued at $566 million based on its market capitalization.

LC Titan is a significant player in the Southeast Asian petrochemicals sector, specializing in the production of fundamental petrochemicals such as ethylene, polyethylene, and polypropylene across Malaysia and Indonesia. Lotte Chemical acquired full ownership of LC Titan in 2010, purchasing a 70% stake from Malaysia’s Chao Group and a 30% stake from Permodalan Nasional Berhad, a Malaysian investment management company, for 1.5 trillion won ($1.1 billion). In 2017, LC Titan went public in Malaysia, attaining a market value of 4 trillion won, marking a significant increase from its initial acquisition price. However, its enterprise value has since declined to $592 million as of the latest assessment.

This acquisition elevated Lotte Chemical to the status of a global chemical company, following a series of acquisitions of domestic petrochemical firms, including subsidiaries of Hyundai and Samsung groups. LC Titan experienced robust financial performance, generating annual profits ranging from 300 billion to 500 billion won until the mid-2010s. However, it began facing deficits in the second quarter of 2022, culminating in a loss of 61.2 billion won in 2023. To address these challenges, Lotte Chemical divested all its production facilities for general-purpose petrochemicals in China last year, aiming to mitigate losses.

In 2023, Lotte Chemical's basic petrochemicals division recorded losses amounting to 201.5 billion won, reflecting the industry-wide challenges faced by petrochemical companies. Similarly, LG Chem's petrochemicals unit reported a loss of 14.3 billion won in the same year.