UPDATED: Axiall Corp. is considering yet another takeover bid — this time from Lotte Chemical Corp. — and an analyst following the company says it may be time for Axiall to jump on one of its two buyout offers.
Axiall President and CEO Tim Mann confirmed the Lotte offer in a June 7 letter to employees. “At this time, our board has not made any decisions concerning the Lotte offer,” he said, adding that the firm's board “is open to considering strategic alternatives … in addition to continuing as a stand-alone company [and] is willing to consider all alternatives that deliver full and fair value to all stockholders.”
The Lotte offer comes as Axiall already has been fending off a similar bid from rival Westlake Chemical Corp.
Officials with Lotte — which has a U.S. office in Houston — could not be reached for comment.
Axiall has rejected Westlake's bid, with officials saying that it undervalues their company. Axiall and Westlake each have nominated slates of directors for election at Axiall's annual meeting in New York on June 17.
On May 23, officials with Houston-based Westlake said in a news release that Axiall had asked its firm to submit a revised proposal by June 3. Westlake officials said that they would do so. Westlake said it intended to submit a revised proposal, or reaffirm its current proposal, on that date.
“Westlake will continue to proceed with its current proxy contest to replace Axiall's board in light of the uncertainty as to whether Axiall's announced process to consider strategic alternatives will conclude, if at all, in advance of Axiall's annual meeting on June 17, 2016,” the company said in a news release.
A spokesman added Westlake would have no further comment.
News of the Lotte bid had a positive impact on Axiall's per-share stock price, sending it up more than 10 percent from $23.30 on June 6 to $25.70 in early trading June 8.
In a research note, market analyst Darspal Mann said that it was time for Axiall to “throw in the towel” and accept one of the two offers. Axiall stock “has appreciated close to 200 percent over the last five years, but the fundamentals suggest that the trajectory going forward may not be as smooth,” said Mann, who's with Khora Capital Partners in Boston.
Commodity price movements “are eroding some of the advantages for the business model based on favorable natural gas cost dynamics,” he added. “After oil, raw material and product prices for the company may follow the decline, which usually leads to de-stocking at the customer level, suggesting that coming months may be tough during the seasonal weak period.
“Increased volatility is rarely good for commodity chemicals. Buyers take a pause and investors are usually better off following their lead.”
In December, Axiall and Lotte announced they would work together to develop a new $1.9 billion ethylene feedstock complex in Lake Charles, La., in a joint venture termed LACC.
Seoul-based Lotte Chemical is a member of the Lotte Group, which has been listed on the Korean Stock Exchange since 1991. Its product mix includes a wide variety of resins, feedstocks and specialty chemicals including polyethylene, polypropylene, ethylene, propylene, benzene and PET. Lotte has facilities in South Korea, China, Malaysia, Indonesia, Pakistan, the United Kingdom and the United States.