Lotte Still on Prowl

Vice Chmn. Shin D.B. sees no let up in Lotte’s hunt for M&A targets to beef up the petrochemical sector

Vice Chairman Shin Dong-bin of Lotte Group said they will continue to expand their petrochemical business through M&As, hinting at more takeovers in such countries as Malaysia and Indonesia.
He met with reporters at a meeting of large firms and SMEs to discuss mutual cooperation for “mutual survival” on Oct. 25 at the Lotte Hotel in downtown Seoul.
He also doubted anything will come out of the investigation of Lotte Construction by the National Tax Service, adding that if anything comes up, he will take appropriate measures then. Shin engineered the largest M&A for the group in July when he managed to take over Titan, a Malaysian petrochemical company, for 1.5 trillion won, and he has been continuously looking for further targets ever since. Officials of the group said the petrochemical sector has become a key operation sector for the group with the vice chairman giving that area a lot of attention lately.
Shin declared “Vision 2018” in March, designed to be active in the M&A market to achieve the vision’s targets, which will bring total sales to 200 trillion won to rank among the top 10 business groups in Asia.
In order for the group to achieve the target, all affiliates should grow together, but the petrochemical sector is designed to play a key role in boosting the total sales revenue for the group.
Lotte Group’s total sales last year amounted to 49 trillion won, with the petrochemical sector chipping in 8.1 trillion won or around 17 percent. In order to expand the petrochemical sector’s turnover to as large as that of the retail sector, Shin decided to take over petrochemical companies in Southeast Asia, where they have been growing fast.
The group took over from three to four companies on average over the past several years, but this year the group has already taken over eight companies, three of them petrochemical companies. The situation means that the group wants to have its functional basic resources business grow, led by Honam Petrochemical and KP Chemical and focused on the expansion of the production of ethylene, among others.
Honam Chemical took over a company producing multiple radiocarbons to enter the radiocarbon market in August, showing the group’s strategy to expand its resources material business using its many technologies, despite its small scale.
Under Shin’s leadership, President Chung Beom-shik of Honam Chemical is about to visit Japan to talk with Mitsui Chemical on a possible joint venture. Chung said the group plans to take over two small technology-intensive chemical firms during the remainder of this year.
Vice Chairman Shin doesn’t intend to give up the group’s lead in the retail sector, either ― even if the SSM law is passed in the parliament. The proposed SSM law is designed to bar the expansion of retailing businesses operated by large companies under the mutual survival partnership between large and small companies, which may be in effect by the end of the year if it is passed as intended.
The group operates Lotte Department Store in the retailing business sector and the Lotte Super only in the SSM related area and is not inclined to give up the two retail outlets. Lotte started operating the department store in the SSM area in 2001 and began to actively expand the operation when President Soh Jin-sae took over as CEO in 2006. Last year, the department store had the largest number of branch stores around the country, raking in the largest sales revenue among the department stores in the country.
Lotte Super currently has the largest number of outlets around the country with 239 ahead of Home Plus Express with 214 and GS Supermarket with 190.
In 2003, Honam Petrochemical took over Hyundai Petrochemical for 600 billion won to become the largest producer of ethylene in Korea, followed by its takeover of a 53.8 percent stake in KP Chemical in 2004 for 178.5 billion won to enter the production of the chemical fiber raw material sector. In 2009, KP Chemical took over PPTA in Pakistan, a producer of polyester and chemical fiber raw material, turning out 500,000 tons annually. KP Chemical also took over Astenius Co. in Britain, which produces 1.95 million tons of PTA and PET annually, the largest in Korea. Honam Petrochemical paid 1.5 trillion won to take over Titan Co., the largest producer of ethylene in Malaysia, making Honam the second largest producer of the petrochemical raw material in Asia. nw

Vice Chmn. Shin Dong-bin of Lotte Group.