MOSCOW (MRC) -- Hanwha Group has lost to US-based chemical company Chevron Phillips in a bid to acquire a 50% stake in global chemical company Sasol’s ethane cracking center (ECC) located in Louisiana, for which the South Korean conglomerate offered more than USD3 billion, according to Korean Investors.
Hanwha’s offer was believed to be much lower than Chevron’s bidding price in the competition which attracted other energy giants such as ExxonMobil, LyondellBasell, and Ineos. The heated rivalry eventually hiked up the price to 4 trillion won (USD3.3 billion), double the initial projection.
“Not only was there a significant price gap between Hanwha and Chevron, but the tables turned for good when Chevron eagerly accepted selling terms,” explained a source familiar with the deal on August 6.
Hanwha Solutions, the chemical arm of Hanwha Group, was one of the final and the only Korean bidder in the official tender. Other local bidders including LG Chem and private equity firm SJL Partners dropped out after the preliminary bid.
Hanwha was quite active in its efforts, creating a consortium with Daishin PE to raise about 2 trillion won. The company had planned to raise the remaining 2 trillion won in acquisition financing from multiple commercial banks.
Sasol has actively invested in the Lake Charles ECC complex in the US since 2014, injecting over USD12 billion in the development process which significantly increased the company’s debt.
Earlier in March, Sasol announced that it would consider selling some of its assets as part of the company’s measures to address financial challenges intensified by the global pandemic and the decline in oil and chemical prices.
This offered an attractive opportunity for industry peers to acquire a valuable asset at a modest price given that the 50% stake was valued around late 2 trillion at an early stage.
Hanwha was keen on acquiring a stake in Sasol to diversify its business structure. The Korean conglomerate operates a naphtha cracking center (NCC) which distills crude oil to extract the naphtha required for ethylene. The company had taken a growing interest in ECC because it uses shale gas to make ethylene which is cheaper and less volatile in production costs compared to naphtha.
Meanwhile, there had been concerns regarding the deal as it posed burdensome conditions for local players. When determining assets for sale, Sasol decided to sell mostly general products such as ethylene instead of high-value-added products within the ECC complex which prompted LG Chem to drop out of the bid.
There were also concerns about post-merger integration given that it would be difficult for domestic companies to control local staffing compared to global chemical companies that have more resources.
As MRC reported earlier, Sasol's world-scale US ethane cracker with the capacity of 1.5 mln tonnes per year reached beneficial operation on 27 August 2019. SasolпїЅs new cracker, the heart of LCCP, is the third and most significant of the seven LCCP facilities to come online and will provide feedstock to our six new derivative units at the company"s Lake Charles multi-asset site.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
Sasol is an international integrated chemicals and energy company that leverages technologies and the expertise of our 31 270 people working in 32 countries. The company develops and commercialises technologies, and builds and operates world-scale facilities to produce a range of high-value product stream, including liquid fuels, petrochemicals and low-carbon electricity.
Hanwha Group is one of the largest business conglomerate in South Korea. Founded in 1952 as Korea Explosives Inc., the group has grown into a large multi-profile business conglomerate, with diversified holdings stretching from explosives, their original business, to retail to financial services.
MRC