Lotte Group Chairman Shin Dong-bin. (Photo: Lotte Group)

Lotte Corp., the holding company of Lotte Group, acquired Lotte Chemical, a core company of the group, as one of its affiliates, resuming restructuring of its corporate governance that had been put on hold.

Lotte Corp. announced on Oct. 10 the holding company took over 4.1 million shares of Lotte Chemical, owned by Hotel Lotte and 3.86 million shares of the chemical company, owned by Lotte Property Development, for a combined 2.227 trillion won. The move allows Lotte Corp. to secure a 23.24 percent of Lotte Chemical.

It came a few days after Lotte Group Chairman Shin Dong-bin was released from prison for a suspended term. The move is part of Chairman Shin’s scheme of restructuring its corporate governance, dubbed “New Lotte.” In August 2015, Chairman Shin announced a plan to make the group shift into a holding company system and ease cross shareholdings. Lotte Crop. said the acquisition was designed to stabilize the group’s holding company regime and diversify its business portfolios, focusing on distribution and food & beverages.

Lotte Corp.’s acquisition of Lotte Chemical brings the number of the holding company’s affiliates from the current 51, including 20 in the distribution sector and 12 in food sector, to 61, including newly added 11 chemical companies. Lotte plans to pay 580 billion won in transfer tax on Lotte Corp.’s buying of the stake in Lotte Chemical, part of the corporate tax the group will tender to tax authorities next March.

Lotte Group Chmn. Shin’s ‘Guts Management’ to Build Louisiana EG Plant Pays Off

Lotte Chemical’s construction of an ethylene glycol (EG) plant in Lake Charles Prince, Louisiana, the United States, is to be completed on a piece of land covering 1 million sq. meters, equivalent to the size of 150 soccer stadiums, in October.

The dedication of the plant draws a keen attention as it is capable of producing ethylene, an important chemical material, at prices 30 to 40 percent cheaper than conventional chemical plants. Despite pessimistic views that such a plant would be unfeasible as the price of crude oil plunged below $30 per barrel two years ago, Lotte Chemical made up its mind to launch the project in 2016.

Lotte Chemical’s decision has paid off, and it is expected to help the company rise to a global chemical player.

Ethylene, a basic material of such petrochemical products as plastic, timber and textiles, is produced through the cracking of naphtha, which comes from the refining of crude oil. So when crude prices go up, naphtha and ethylene prices also increase.

But Lotte Chemical’s EG plant in Louisiana is employing an innovative method of drawing ethylene from shale gas wells.

The United States, the most active country to exploit shale gas development, is aiming to max out shale gas use for the chemical industry. In particular, as international crude oil prices skyrocketed above $100 per barrel in the early 2010s, global chemical companies scrambled to venture into shale gas development projects.

In 2014, Lotte Chemical teamed up with Axiall to build the EG plant in Louisiana. As international crude oil prices plunged, many companies gave up projects. President Hwang Jin-gu of Lotte Chemical America said that even though crude oil prices plunged to $30 just before the groundbreaking, Lotte Group Chairman Shin Dong-bin had the guts to push the project.

As the progress of the project now stands at 97 percent and crude prices have soared to $80, looking back at the groundbreaking, it was felt like a dream, he said.

Lotte Chemical plunked down about $3 billion (3.4 trillion won) for the EG plant in Louisiana, the largest investment by a Korean chemical company in the state.

The company’s Louisiana plant is capable of producing 1 million tons of ethylene and 700,000 tons of EG, the first fabrication of ethylene, annually. When the Louisiana plant is dedicated, Lotte Chemical’s combined ethylene production in Korea and abroad will amount to 4.5 million tons, making the chemical company rank 1st in Korea, accounting for 2.6 percent of global ethylene production.