KFTC begins review of Lotte-HD Hyundai petrochemical merger

South Korea's Fair Trade Commission (KFTC) has initiated a review of a significant merger between Lotte Chemical and HD Hyundai Chemical, marking the first major restructuring in the country's petrochemical sector. The proposed business combination is part of a broader plan to reorganize operations within the Daesan petrochemical complex.

The core of the deal involves HD Hyundai Chemical absorbing Lotte Daesan Petrochemical. Following this merger, Lotte Chemical will acquire additional shares in the merged entity, resulting in both Lotte Chemical and HD Hyundai Oilbank holding a 50% stake each in HD Hyundai Chemical. This integration will lead to the unified operation of naphtha cracking facilities and other petrochemical production assets of the two companies located in the Daesan complex.

The KFTC has expressed concerns that this merger could significantly limit competition in the domestic market for specific products, namely low-density polyethylene (LDPE) and ethylene-vinyl acetate (EVA). The commission fears that the consolidation of competitors in these markets could facilitate collusion on prices, quantities, and trading terms. Additionally, the KFTC noted the potential for the merged entity to unilaterally raise prices, as competitors might struggle to supply sufficient alternative products in a timely manner.

To address these concerns, the KFTC has engaged in a corrective measures submission process. This allows the merging companies to propose solutions that adequately resolve the competition issues. The KFTC's review will determine the final outcome, including any necessary corrective orders, following deliberation by the commission. The KFTC aims to conclude the review swiftly.