South Korean potential buyers are moving fast to acquire a minority stake in the Sasol’s Lake Charles Chemicals Project (LCCP) Ethane Cracker in the U.S state of Louisiana. LG Chem and Hanwha Solutions have hired legal advisors and SJL Partners is in talks with strategic partners to join the race.
LG Chem and Hanwha Solutions have reportedly carried out their process to hire advisory firms to receive legal advice in the U.S. and in Korea, according to industry sources on June 29. They have seemingly accelerated the selection process considering restrictions on due diligence due to the Covid-19 pandemic.
LG Chem and Hanwha Solutions, which focused on investing in naphtha crackers, have decided to join the race in a bid to gain their foothold in North America and diversify their business portfolios. LG Chem has reportedly hired Goldman Sachs and Lee & Ko as its legal advisors. Hanwha Solutions has hired a local legal advisory firm through Hanwha America while Yulchon LLC will provide the company with legal advice at home.
Market insiders said LG Chem and Hanwha Solutions are among the strong candidates to be selected as shortlisted bidders. Sasol reportedly prefers to join hands with strategic investors to expand its presence to other continents including Asia amid expectations for increasing ethylene supply over the next few years.
Global strategic investors such as Chevron Phillips Chemical, Ineos Group and ExxonMobil participated in the first round of bidding. All of them are global chemical companies seeking to expand their ethane cracker facilities.
“The biggest reason for Sasol’s stake sale is a financial problem, but the company also wants to disperse risks amid concerns about the oversupply of ethylene in the U.S.,” said an industry source. “That is why the company prefers strategic investors who are able to handle sales as its prospective buyers rather than private equity firms.”
With the seller seeking a strategic investor, South Korean PE firm SJL Partners is reportedly in talks with a domestic conglomerate, aiming to participate in the final round of bidding with the strategic investor.
But industry insiders expect the PE firm to link with Hanwha Solutions or LG Chem. This is because SK Group and Lotte Chemical, which were initially expected to participate in the race, decide not to participate while Hanwha Solutions and LG Chem are highly likely to be shortlisted.
Up for sale is an approximately 50% in the LLCP, with the price tag estimated about 2 trillion won ($1.6 billion). Sasol’s world-scale U.S. ethane cracker has the capacity of 1.5 million tons per year.
The move to find a buyer highlights Sasol’s need for cash as it struggles with $7 billion in debt taken on to develop the LCCP. The final round of bidding is likely to take place as early as July. (Reporting by Ik-hwan Choi)