FTC conditionally approves merger plan under gov't-led petrochemical restructuring scheme

The antitrust regulator, the Fair Trade Commission (FTC), has given the green light to a proposed merger plan under the government-led initiative aimed at restructuring the local petrochemical industry, which has been grappling with a prolonged slump. The FTC examined the merger and stock purchase agreement involving four key players: Lotte Chemical Corp., Lotte Daesan Petrochem Corp., HD Hyundai Oilbank Co., and HD Hyundai Chemical Co. The approval came with a condition that price hikes must be kept in check.

Under the proposed plan, HD Hyundai Chemical will consolidate with Lotte Daesan Petrochem, while Lotte Chemical will purchase shares in the newly formed HD Hyundai Chemical. As a result, HD Hyundai Oilbank and Lotte Chemical will each secure a 50% stake in the newly established entity. The FTC has noted that the merger would reduce the number of corporate entities and potentially limit competition in the local markets for low-density polyethylene (LDPE) and ethylene-vinyl acetate (EVA).

In response to concerns about reduced competition, the FTC has mandated the companies to cap the changes in domestic prices for LDPE and EVA over the subsequent five years. These prices will be based on the export price range. The proposed plan is part of the companies' self-rescue strategy and comes at a time when the sector is grappling with a surplus of supply and declining price competitiveness when compared to Chinese competitors.