Thursday 28 Mar 2024
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KUALA LUMPUR (Aug 9): Lotte Chemical Titan Holdings Bhd (LCT) is planning to trim its equity stake in PT Lotte Chemical Indonesia (LCI) by selling a 49% stake in the subsidiary to its parent Lotte Chemical Corp (LCC) for US$65.4 million (RM273.49 million) cash.

Bursa-listed LCT will still hold a 51% stake in the Indonesian unit after the share sale.

The rationales for the proposed divestment are the challenging petrochemical business environment and financial performance, which are causing continuous margin compression of LCT’s profits as well as a decrease in cash flows from operations, according to a filing with Bursa Malaysia today.

In pursuant to the proposed divestment, the company said LCC will participate directly in LCI’s Integrated Petrochemical Facility Project (IPF) together with LCT based on their respective proportionate shareholdings.

The company said LCC will be able to enhance the credibility of LCI in completing the IPF, as LCC is an established name in the petrochemical industry.

LCT added that the gearing level is better managed with LCC as a partner to the IPF Project, noting that LCC has extensive experience in the setting up of petrochemical plant and LCC’s direct participation is expected to add confidence to investors.

Noting that the proposed divestment does not result in a loss of control, LCT said there will be no gain or loss recorded in the consolidated statement of comprehensive income of LCT Group and the financial effects arising from the changes in ownership interest in LCI will be recognised directly in the equity.

“The proposed divestment is expected to give rise to an increase in the total equity attributable to owners of LCT Group by approximately RM15.03 million for the financial year ending Dec 31, 2019, after taking into consideration the sale consideration of RM273.49 million for the proposed divestment,” said the company.

Of the total cash proceeds of RM273.49 million, the bulk of RM251.49 million (91.96%) will be utilised to fund the IPF project, while the remaining RM22 million will be used for estimated expenses.

Barring unforeseen circumstances, the proposed divestment is expected to be implemented by the first quarter of 2020, said LCT.

Shares of LCT closed 13 sen or 5.2% up at RM2.63 today, valuing the company at RM5.98 billion. Over the past year, the stock has fallen some 47% from RM2.63, and it also plunged as much as 60% from its initial public offering price of RM6.50 in July 2017.

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