Honam Petrochemical Goes Big, Overseas

Considers two or three more M&As during this year

Honam Petrochemical Corp. (HPC) President and CEO Chong Bum-shick indicated that his company will continue to attempt more M&As within this year, like the latest successful acquisition of Malaysia’s Titan Chemicals Corp.
Chong told reporters following a meeting of CEOs in the domestic petrochemical industry at the Shilla Hotel in Seoul on Aug. 19, “We’ll pursue two or three more small- and medium-sized M&As.” One of the M&A target companies on which Honam Petrochemical has its eye is an ultra-performance polymer manufacturer in Japan or Europe, business sources said.
Korea’s second-largest ethylene maker said last July it agreed to purchase Malaysia’s biggest petrochemical company, Titan Chemicals Corp., for 1.5 trillion won in a bid to raise the portion of revenues from overseas markets. HPC reached the deal to take over a 37.3 percent stake in Titan from Chao Group and a 35.3 percent holding from Permodalan National Bhd.
HPC, a subsidiary of the Lotte Business Group, is Korea’s second largest ethylene producer, while Titan Chemicals is Malaysia’s biggest producer of olefins and polyolefins, used in making plastic parts in appliances and automobiles.
The acquisition is the biggest international M&A deal involving a Korean company so far this year, and the deal will make HPC Asia’s second-largest petrochemical producer after Taiwan’s Formosa Petrochemicals by raising its ethylene production from 1.75 million tons to 2.5 million tons. The agreement will provide HPC with an opportunity to strengthen its presence in overseas markets, particularly in Southeast Asia where demand for petrochemicals is on a rapid surge.
Regarding financing his company’s acquisition of Titan Chemicals, Chong said his company will strive to minimize outside borrowings. He said his company was considering ways of securing profits by capitalizing on the cost competitiveness in the Southeast Asian market it will accumulate while operating Titan Chemicals and reinvesting the revenues.
Asked about its possible acquisition of KP Chemical, also a subsidiary of the Lotte Business Group, Chong said there is no change in his company’s plan to consolidate his company and KP Chemical in consideration of market conditions, but the timing for the merger may not be within this year.
HPC has set its sights on becoming Asia’s No. 1 petrochemical company with the goal of posting 40 trillion won in annual sales in 2018. The vision calls for strengthening its presence in Korea and abroad through M&As, expanding its production in China, making inroads into new businesses including bio/water treatment and diversifying its exporting portfolios.
Since its establishment, HPC has devoted itself to developing and localizing superb technology. As a comprehensive petrochemical company, HPC has led the growth of the Korean heavy chemicals industries. In 1992, raw material processing facilities like a naphtha cracking center and aromatic compound plants were added to HPC’s world-class site in the Yeosu Petrochemical Complex to complete its vertical business integration from raw materials to finished products.
HPC’s ceaseless development has continued. In 2001, the company increased its production capacity of ethylene to 700,000 tons yearly, and built a special chemical plant. nw

(left) Honam Petrochemical Corp. President Chong Bum-shick. A petrochemical facility of Malaysia’s Titan Chemical Corp., acquired by the Korean petrochemical company.