Lotte Chemical Titan IPO the largest in Malaysia; IPO funds to build petchem facility in Indonesia

Lotte Chemical Titan Holdings, set to be the biggest initial public offering (IPO) in Malaysia since 2012, has clinched five cornerstone investors who will acquire 18.4% or 136 million shares of the IPO’s base offering. The investors are Permodalan Nasional Bhd, Maybank Asset Management Sdn Bhd, Maybank Islamic Asset Management Sdn Bhd, Eastspring Investments Bhd and Great Eastern Life Assurance (Malaysia) Bhd.

With a retail issue share price of RM8 per share, Lotte Chemical, scheduled to be listed on the Main Market of Bursa Malaysia on 11 July, and is expected to raise RM5.9 billion from its IPO. Post-listing, Its market capitalisation will be RM19.7 billion.

This marks the group’s comeback to the stock market after it went private seven years ago, when South Korea’s Lotte Chemical bought Malaysia-based Titan Chemicals Corp for US$1.25 billion in 2010.

Upon listing, its South Korea-based parent company Lotte Chemical Corp will see its shareholding reduced to 70%.

The Johor-headquartered firm has earmarked more than 80% or RM4.9 billion of the proceeds from the IPO for the construction of an integrated petrochemical facility in Banten Province, Indonesia, scheduled for construction in 2018/2019, with completion slated for 2023.

The remaining RM1 billion will be used to build a PP plant to create an additional 200,000 tones/year supply in Johor as well as to upgrade its existing naphtha cracker plant to increase capacity. In Malaysia, Lotte Chemical owns two naptha cracker plants with a combined capacity of 700,000 tonnes/year.

According to news reports, Lotte Senior Vice-President Philip Kong has said that the expansion in Indonesia will fill the gap in the market demand, since the country “is a huge importer of polyolefins and the market is huge there.”

Currently the group has three PE plants in Indonesia with a capacity of 450,000 tonnes/year.

Established in 1991, Lotte Chemical is the fourth largest producer of polyolefin products in Southeast Asia by capacity in 2016. It produces polyolefins, comprising PE and PP and olefins, comprising ethylene and derivatives such as butadiene, tert-butyl alcohol, benzene and toluene.

Lotte’s Malaysian and Indonesian markets make up 70% of its overall business, while it also sells to other Southeast Asian countries and China.

With the completion of the Indonesian project, its aim is to be a sizeable petrochemical company in the region, emulating the likes of Siam Cement, PTT Global and ExxonMobil Chemical.