Honam to Acquire Titan Chemicals for $1.25 Billion
July 16, 2010, 4:02 AM EDT
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July 16 (Bloomberg) -- Honam Petrochemical Corp. will acquire Malaysia’s Titan Chemicals Corp. in an all-cash deal valued at $1.25 billion in South Korea’s biggest overseas acquisition this year.
South Korea’s second-largest ethylene maker will buy all of Titan’s stock for 2.35 ringgit (73 cents) a share, the Malaysian company said in a statement today. That’s a 27 percent premium to Titan’s closing price of 1.85 ringgit yesterday. Honam will pay 1.5 trillion won ($1.25 billion) for the purchase, the Seoul-based company said in an e-mailed statement.
South Korean chemical companies are increasing investment overseas as a global economic recovery boosts demand for ethylene, a raw material used to make plastics and synthetic fibers. Honam said it expects the Titan acquisition to bolster its presence in Southeast Asia, China, the Middle East and Central Asia, and raise its revenue to 12 trillion won this year.
“The acquisition will help Honam become Asia’s largest ethylene maker,” said Yoo Young Kuk, an analyst at KTB Securities Co. “The increased ethylene output capacity will boost Honam’s medium to long-term growth forecast as the global economic recovery will increase chemical demand.”
The South Korean ethylene producer has enough cash reserves to finance the Titan acquisition, though it may raise some funds in the market, Roger Lee, a company spokesman, said by telephone, without specifying whether the money would be raised through debt or equity.
Honam has signed an agreement to acquire a 37.3 percent stake in Titan from Chao Group and a 35.3 percent interest from Permodalan National Bhd., Lee said. Honam is required to make an unconditional takeover offer to the remaining holders at a cash consideration of 2.35 ringgit a share, Titan said.
Overseas Sales
Shares of Honam advanced 8.8 percent to close at 161,500 won, the highest since Oct. 18, 2007. The benchmark Kospi index declined 0.7 percent. Trading in Titan was halted in Kuala Lumpur today.
Overseas sales account for 55 percent of Honam’s total revenue, Lee said. The company plans to increase the ratio, he said, without giving a target.
Honam’s annual capacity to produce ethylene will rise to 2.47 million metric tons after the acquisition, from 1.75 million tons currently, the company said.
Titan is Malaysia’s biggest producer of olefins and polyolefins, used in making plastic parts in appliances and automobiles, and reported sales of $1.64 billion last year.
HSBC Holdings Plc is the international financial adviser for Honam and RHB Investment Bank Bhd. is the company’s Malaysian adviser, the chemical producer said.
South Korea’s Hanwha Chemical Corp. last year formed a venture with Saudi International Petrochemical Co. to build a 4 billion-riyal ($1.1 billion) plant in the Middle East’s biggest economy.
--Editors: Ryan Woo, Amit Prakash.
To contact the reporter on this story: Shinhye Kang in Seoul at skang24@bloomberg.net Seonjin Cha in Seoul at scha2@bloomberg.net
To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.
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