KARACHI: A South Korean chemical company announced on Monday it’s exiting the Pakistan market after 13 years.

Lotte Chemical Company Pakistan Ltd said its South Korea–based majority shareholder is selling its entire stake of 75.01 per cent in the local firm to optimise its overall business portfolio.

Separately, Lucky Core Industries Ltd said it’s buying the shareholding from the foreign investor. Neither of the two companies disclosed the size of the transaction in their respective securities filings.

But based on a Bloomberg News story that referred to the transaction value in the South Korean currency, analysts said the deal was signed at Rs31.30 per share. This means the local acquirer will pay $155.8 million or Rs35.5 billion for a three-quarters stake in the company valued at $207.7m.

Speaking to Dawn, Arif Habib Ltd CEO Shahid Ali Habib said the importance of the deal couldn’t be overemphasised in view of the prevailing economic and political situation.

“It’s a great transaction in the sense that a local conglomerate has stepped up and demonstrated its commitment to the country,” he said.

Lotte Chemical Company makes purified terephthalic acid (PTA), which is a raw material for textile and packaging industries. The company enjoys a captive market of sorts as the country’s only manufacturer and supplier of PTA. Its entire output is consumed by the local textile and packaging industries.

Mr Habib insisted that the divestment of shares by the Korean investor shouldn’t be construed as flight of foreign capital from Pakistan.

“The Koreans were looking for an exit for about a year and a half. Their decision has nothing to do with our local issues,” he said.

The foreign investor will use the proceeds of the divestment to expand its “value-added operations” and enter “eco-friendly materials business”.

Mr Habib added that the local buyer — which is a part of the Yunus Brothers Group that controls stakes in cement, textile, power generation and commodity trading businesses — is expected to increase the PTA-producing capacity of Lotte Chemical Company from the existing 500,000 tonnes annually to make the company export-oriented.

The divestment by the Korean investor is part of a years-long trend in which foreign companies have been exiting the Pakistan market. Multiple sources within the corporate sector said few foreign investors have been able to repatriate dividends from Pakistan since March 2022.

This is despite the fact that the country touts a liberal foreign investment policy that allows 100pc profit repatriation. According to one source, the amount of dividends pending for repatriation is in excess of $1bn. The State Bank of Pakistan last updated its monthly data for profit repatriation in December 2022.

The dollar payments are expected to stay stuck in the foreseeable future given that the country’s foreign exchange reserves are at a multi-year low.

Lucky Core Industries was known until recently as ICI Pakistan Ltd. Back in 2008, AkzoNobel, which is one of the largest coatings and chemicals companies globally, became the ultimate holding company of ICI Pakistan Ltd. Lucky Holdings Ltd then acquired the majority shareholding from AkzoNobel in 2012 and became the ultimate holding company of ICI Pakistan Ltd.

It went on an acquisition spree in the following years and acquired assets in pharmaceutical,

chemical and formula milk businesses. Its net profit for 2021-22 amounted to Rs8.86bn on a consolidated basis, up 69pc from a year ago. Its consolidated turnover increased 56pc to Rs100.86bn in the same year.

Published in Dawn, January 17th, 2023

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