Korea Fair Trade Commission Conditionally Approves Daesan Petrochemical Merger

South Korea's Fair Trade Commission approved on August 20 the country's first government-led petrochemical restructuring, granting conditional approval for the Daesan No. 1 industrial reorganization project.

Under the merger deal, HD Hyundai Chemical will merge with Lotte Daesan Petrochemical, with Lotte Chemical acquiring shares in the combined entity, while ownership will be split equally between HD Hyundai Oilbank and Lotte Chemical at 50% each.

The approval included corrective measures valid for five years, limiting domestic price increases for LDPE and EVA to not exceed export price rates, prohibiting the exchange of sensitive competitive information such as prices, volumes, costs, and inventory, as well as preventing executive overlap between the two companies.

The commission noted that the merger will reduce the number of players in the Korean LDPE and EVA markets from four to three; however, the effectiveness of the five-year restrictions in preventing price coordination among three major players will remain dependent on the strictness of enforcement and continuous monitoring.

What do these terms mean?

LDPE: Low-density polyethylene — a flexible plastic used in plastic bags, packaging wraps, and electrical wires.

EVA: Ethylene-vinyl acetate — an elastic plastic material used in shoe soles, solar panels, and lightweight foams.

Conditional Approval: A decision permitting a merger deal while subjecting the parties to specific conditions to limit its negative impact on market competition.

Government-Led Industrial Restructuring: A program in which the government intervenes to reorganize sectors suffering from excess capacity by merging companies to improve efficiency and reduce costs.