Fair Trade Commission Begins Preliminary Review of Lotte Chemical-HD Hyundai Chemical Merger

Fair Trade Commission Begins Preliminary Review of Lotte Chemical and HD Hyundai Chemical Merger
First Case of ‘Petrochemical Industry Restructuring’
Thorough Assessment Planned for Impact on Value Chain and SMEs

The Fair Trade Commission has begun a preliminary review of the business combination between Lotte Chemical and HD Hyundai Chemical. This merger marks the first case of business restructuring in the petrochemical industry since the public-private sector began pushing for industry restructuring in August. The preliminary review is a system in which companies seeking a merger can request the Fair Trade Commission to examine in advance whether the merger would substantially restrict competition, prior to the official reporting period.

On November 26, Lotte Chemical and HD Hyundai Chemical announced that they had applied for a preliminary review of their business combination. The two companies are currently negotiating a business restructuring plan to merge their naphtha cracking center (NCC) plants within the Daesan Petrochemical Complex. Under the proposed structure, Lotte Chemical will first physically spin off its Daesan plant, then the newly established entity will merge with HD Hyundai Chemical. After the merger, Lotte Chemical and HD Hyundai Oilbank will each hold a 50% stake in the merged entity. Both companies currently operate their businesses centered around naphtha cracking facilities (NCC) at the Daesan Petrochemical Complex.

This business combination is the first case under the ‘Petrochemical Industry Restructuring’ initiative. The Fair Trade Commission has provided customized support, such as preliminary consulting to reduce the risk of information exchange between companies and encouraging the use of the preliminary review system. The commission has also worked with the Ministry of Trade, Industry and Energy to enact the ‘Special Act on Petrochemicals,’ which includes special provisions for business combinations and joint conduct. The Fair Trade Commission explained that, considering the official filing is expected to take place next year, it has been encouraging companies to apply for preliminary review in advance.

The commission stated that a more thorough review is necessary, given the potential impact of this merger on the entire petrochemical industry value chain, adjacent markets, and business partners such as small and medium-sized enterprises. The Fair Trade Commission added, “We will fulfill our responsibilities as a competition authority by comprehensively verifying the possibility of harm to SMEs and consumers, as well as improvements in national economic efficiency.”

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