Lotte Chemical to raise at least $1.38bn in Malaysia
Expansion drive will produce largest regional IPO since 2013
CK Tan, Nikkei staff writer
KUALA LUMPUR -- Lotte Chemical, a unit of the South Korean family-owned conglomerate Lotte, announced plans on Friday to raise up to 5.9 billion ringgit ($1.38 billion) through an initial public offering.
The IPO will involve local unit Lotte Chemical Titan (LCT) selling some 740.5 million shares -- 30% of the enlarged issued share capital. With a retail price of 8 ringgit per share, LCT's expected 5.9 billion ringgit will exceed the record 4.6 billion ringgit raised by pay-TV operator Astro Malaysia Holdings in August 2012.
The listing is planned for July 11, and will be the largest in Southeast Asia since April 2013 when Thailand's BTS Group, Bangkok's SkyTrain operator, raised $2.1 billion. It should give LCT a market capitalization of nearly 20 billion ringgit with Lotte Chemical's stake reduced to 70%.
Maybank Investment Bank, the principle adviser on the IPO, said the pricing is benchmarked against regional peers. The group aims to return 50% of annual net profit as dividends to shareholders after deducting working capital requirements.
The group has already secured several cornerstone investors, including state investment fund Permodalan Nasional Berhad, Maybank Asset Management, and Great Eastern Life Assurance.
Proceeds will be used to finance LCT's expansion in Malaysia and Indonesia, Lotte Chemical's regional production hubs. Projects include a 15.5 billion ringgit petrochemical plant in Merak, Indonesia, and other facilities in Johor, Malaysia.
LCT is Malaysia's largest and the region's fourth largest producer of polyolefins, feedstocks for plastics products that are exported to over 60 countries. The group acquired the previously listed Titan Chemicals in 2010, and operates a total of 14 plants in both Malaysia and Indonesia. Installed capacity at the end of last year was for production of 2.7 million tons annually. LCT also has a shale gas project in the U.S. constructing an ethane cracker plant in collaboration with Lotte Chemical.
Kim Gyo Hyun, Lotte Chemical's president, said at the launch of LCT's listing prospectus that the group aims to be the largest petrochemical player in the region. LCT expects regional demand for polyolefins to grow at a compound annual rate of 4.4% over the coming decade. With lower feedstock prices, LCT's net profit grew 114% year on year to 1.31 billion ringgit last year on revenue of 8.13 billion ringgit.
Petronas Chemicals Group, a unit of state-owned oil and gas company Petroliam Nasional Berhad, announced in April the final investment decision to build an isononanol, or INA, plant in Johor's Pengerang Integrated Complex. INA is an industrial plasticizer used for automotives and cabling. The $442 million plant will be completed in 2019 with an annual capacity of 250,000 tons.