Lotte Group Sets Sights on Refining Industry
By Kim Hyun-cheol
Staff Reporter
This year, it has acquired a local distiller, attempted to tap into the domestic beer market and even snapped up permission to build a skyscraper right beside a military airport amid scorching criticism.
Rumors now linger that Lotte Group, Korea's eighth-largest conglomerate, is zeroing in on the oil refining business by taking over Hyundai Oilbank.
Currently, the question of the company's ownership is before an international arbitrary court in a feud between its two largest shareholders ― Korea's Hyundai Heavy Industries and International Petroleum Investment Co. (IPIC) of the United Arab Emirates.
With a trial scheduled for later this month at the International Court of Commerce headquarters in Paris, predictions abound that Lotte is likely to make a move to take over the nation's fourth-largest refiner depending on the outcome.
If Hyundai Heavy wins, it will have a priority to buy the IPIC stake in Hyundai Oilbank. But if the judge rules in favor of the Dubai-based financial firm, the sale will be open to a third party later this year at the earliest.
And Lotte is the first to be mentioned in connection to a possible deal.
The company has long been interested in plunging into the oil refining business to accelerate a synergetic effect with its petrochemical affiliates. Currently, Lotte is Korea's No.2 player in petrochemical business firms such as Honam Petrochemical Corp. and KP Chemical.
At the moment, Lotte is dependent on local refiner S-OIL and other foreign-based companies for all of its raw materials. But the takeover of a refiner would provide a more stable source.
This year, Lotte's petrochemical units aim to sell 40 trillion won ($32.1 billion) worth of products. However, most analysts say it is not an easily achievable target without its own refining facilities.
The latest link to the purchase of the refiner doesn't represent the conglomerate's first attempt. Back in 2006, it vied to buy a stake in S-OIL, but gave up after failing to narrow the gap in purchasing price.
Lotte rejected the notion it was preparing a takeover bid for Oilbank, saying there is no project on the go even though it would ``gigantically boost the business."
Still, predictions are mounting that the retailing giant will try to buy the refiner if it is opened up to other companies, with no other remarkable contender thought to be waiting in the wings at the moment.
After recent frustration in its attempts to buy Oriental Brewery, it purportedly has enough extra cash ― up to 2 trillion won ― to beat any local rivals in a fund war.
GS Caltex, for instance, was also interested in securing a stake in Oilbank when IPIC tried to sell off its share in 2007. But the current situation is not favorable to the company, industry insiders say.
``This is not a good time for GS Caltex to be in a money war," said an analyst at a local securities firm, who asked to remain anonymous. ``It is now investing some 3 trillion won on its new heavy oil upgrading facilities. And its holding company GS had to withdraw recently from the competition to acquire Daewoo Shipbuilding & Marine Engineering."
Lotte's persistent moves are in line with the business group's aggressive expansion both at home and abroad in the past few years.
Lotte Confectionery bought the Dutch chocolate maker Gillian for 170 billion won last September, a month before Lotte Shopping completed a deal to acquire a 100-percent stake in PT Makro Indonesia, a Dutch-based retailer, at 385.9 billion won.
Its predatory strides have continued since the turn of the year. It bought Doosan's liquor unit for 503 billion won in January, and earned the government endorsement to its plan to construct a second Lotte World building amid widespread controversy that it could undermine military aviation safety.