MOSCOW (MRC) -- Lotte Group appears to be agonizing over whether to continue pushing ahead with the acquisition of Iljin Materials, due to the seller's rigid stance on the valuation of the nation's second-largest copper foil manufacturer, said Koreantimes.
Iljin Materials' largest shareholder, Huh Jae-myeong, who is also the second-oldest son of Iljin Group Chairman Huh Chin-kyu, reportedly demanded potential buyers to pay at least 3 trillion won (USD2.2 billion) for his 53.3 percent stake in the copper foil producer. In contrast, Lotte Chemical is said to have offered less than 2.5 trillion won.
When Iljin Materials was put up for sale in May, its market cap was around 4.3 trillion won. Its deteriorating sales due to China's zero-COVID policy lockdown measures, and falling copper prices, however, dragged down its market cap below 3.3 trillion won this month.
"Iljin Materials' second-quarter earnings fell short of the market consensus," Samsung Securities analyst Chang Jung-hoon said. "Its revenue from copper foil fell 4 percent from the previous year, due to the falling copper price and decreasing sales in the wake of the global supply chain disruptions."
Amid the skeptical outlook, it has been considered unreasonable for Lotte Chemical to pay 3 trillion won for a 53.3 percent stake in Iljin Materials, even if the buyer takes into account the premium for managerial rights. In addition, Lotte Chemical is the only participant in the main bid to acquire Iljin Materials, as Bain Capital dropped out of the competition due to setbacks in fundraising, according to industry officials.
It also seems difficult for Lotte Chemical to give up on the acquisition, considering Lotte Group's ongoing efforts to focus more on its electric vehicle battery materials business rather than its unprofitable retail business. Earlier this year, Lotte Chemical tried to acquire PI Advanced Materials, the world's leading polyimide film maker, but it lost to Baring Private Equity Asia.
When Lotte Group Chairman Shin Dong-bin was given a special presidential pardon earlier this month, the conglomerate expressed its intention to foster the chemical business. "We will contribute to the improvement of Korea's competitiveness by fostering innovative businesses such as biotech, hydrogen energy and battery materials," the group said in a statement.
According to market tracker SNE Research, Iljin Materials ranked fourth last year in the global copper foil market share, following Korea's SKC, China's Watson and Taiwan's Chang Chun. If Lotte Chemical makes large-scale investments after its acquisition of Iljin Materials, the Korean firm may overcome its Chinese and Taiwanese rivals.
"Once the buyer of the 53.3 percent stake is selected by early next month, Iljin Materials is expected to unveil its plans for additional investments in North America and Spain," NH Investment & Securities analyst Ju Min-woo said.
During a press conference in May, Lotte Chemical said it would invest 4 trillion won in battery materials by 2030.
We remind, Lotte Chemical Corp will invest 10 trillion won (USD7.8 billion) to expand its hydrogen and battery materials businesses through 2030 in a bid to accelerate its decarbonization goals. The Seoul-based petrochemical producer is targeting annual sales of 5 trillion won each in its hydrogen and battery divisions by the end of the decade, it said in a statement. It will spend 6 trillion won on its hydrogen operations and 4 trillion won to boost battery materials output.