South Korea's Fair Trade Commission initiated a review of the merger between Lotte Chemical and HD Hyundai Oilbank's Daesan petrochemical operations on the 15th, citing concerns the deal may substantially restrict competition in domestic markets. The FTC submitted its examination report to the commission and the involved parties, flagging potential anti-competitive effects in the low-density polyethylene (LDPE) and ethylene vinyl acetate (EVA) markets. The merger involves HD Hyundai Chemical absorbing Lotte Daesan Petrochemical, with Lotte Chemical and HD Hyundai Oilbank each holding 50% stakes in the surviving entity. The review is part of the first phase of Daesan petrochemical sector restructuring.
FTC Flags Competition Concerns in LDPE and EVA Markets
The FTC's examination determined the merger poses competition restriction risks in South Korea's domestic LDPE and EVA markets due to the combination of competing businesses. The regulator identified two specific concerns: reduced competition could facilitate coordination on prices, quantities, and transaction terms among remaining market players, and the merged entity could unilaterally raise prices without competitors being able to supply sufficient alternative volumes in a timely manner.
Merger Structure Creates 50-50 Ownership Between Lotte Chemical and HD Hyundai Oilbank
Under the merger structure, HD Hyundai Chemical will absorb Lotte Daesan Petrochemical, with Lotte Chemical acquiring additional shares in the surviving HD Hyundai Chemical entity. Upon completion, Lotte Chemical and HD Hyundai Oilbank will each hold 50% stakes in HD Hyundai Chemical, becoming the largest shareholders. The combined entity will operate integrated naphtha cracking centers (NCC) and other petrochemical production facilities owned by both companies at the Daesan industrial complex.
![Graphic showing key details of Daesan Phase 1 business restructuring]()
Graphic showing key details of Daesan Phase 1 business restructuring [Source: Yonhap News file photo]
Companies Submit Corrective Measures to Address FTC Concerns
The involved companies submitted corrective measures to resolve the FTC's competition concerns. The examination incorporated these proposals and presented a corrective order opinion reflecting the submitted measures.
FTC Plans Expedited Review and Continued Monitoring
The FTC stated it will promptly convene deliberations to finalize the merger review for the first phase of Daesan petrochemical restructuring. The commission confirmed it will closely examine the competitive impact of subsequent petrochemical restructuring projects to protect competition in South Korea's petrochemical market.
FAQ
What did South Korea's FTC do on the 15th regarding the Lotte Chemical-HD Hyundai merger?
The FTC submitted its examination report to the commission and the involved parties, initiating a formal review of the merger between Lotte Chemical and HD Hyundai Oilbank's Daesan petrochemical operations due to concerns over competition restrictions in domestic LDPE and EVA markets.
Why is the FTC concerned about this petrochemical merger?
The FTC identified two competition risks: the reduced number of competitors could make coordination on prices and terms easier among remaining players, and the merged entity could unilaterally raise prices without competitors being able to supply sufficient alternative volumes in a timely manner in the LDPE and EVA markets.
How will ownership be structured after the HD Hyundai Chemical-Lotte Daesan Petrochemical merger?
HD Hyundai Chemical will absorb Lotte Daesan Petrochemical, with Lotte Chemical and HD Hyundai Oilbank each holding 50% stakes in the surviving HD Hyundai Chemical entity, making them the largest shareholders.
