KKR promises not to list LCY Chemical in China, Hong Kong

Founded in 1965 and headquartered in Taipei, Taiwan, LCY Chemical Corp. has been in petrochemical business for more than 40 years and became listed on Taiwan Stock Exchange in 1977. (Courtesy of LCY)

TAIPEI (CNA) — American investment firm KKR & Co. has promised not to list LCY Chemical Corp. in China or Hong Kong as a precondition for approval of its acquisition of the Taiwan-based chemical company.

Taiwan’s Investment Commission issued the green light for the acquisition on Dec. 19 after KKR pledged not to take LCY Chemical public in China or Hong Kong, according to Yang Shu-ling (楊淑玲), a spokesperson of the commission under the Ministry of Economic Affairs.

LCY Chemical said after hearing that the acquisition had been approved that its stock will be delisted at the end of January, but it has said previously that it planned to list again within five years after delisting.

The sale was first announced in July, when the company said KKR would buy all outstanding LCY Chemical shares for NT$47.8 billion (US$1.55 billion), or NT$56 per share, through KKR’s Luxembourg-based unit LuxCo.

The acquisition would include a cash dividend of NT$2.9 to LCY Chemical shareholders, which would bring the actual price of the deal to NT$53.1 per share, the Taiwanese company said.

The stock closed 2.73 percent higher Wednesday at NT$52.7 per share on the Taiwan Stock Exchange.

Under the deal’s terms, KKR will become the company’s only shareholder but will later enter into a joint venture with the family of LCY Chemical’s former chairman, Bowei Lee (李謀偉).

Lee resigned as chairman of LCY Chemical after it was implicated in a series of gas explosions in Kaohsiung in 2014 that resulted in 32 deaths.

The Lee family, which is now the biggest LCY Chemical shareholder with a 27.8 percent stake, will take a 45 percent share in the joint venture, while KKR will hold 55 percent.

In addition to the promise not to list LCY Chemical in China, Yang said KKR has also pledged to provide the company’s employees with benefits and working conditions that are at least equal to what the company is providing now.

Yang said the commission will follow the case closely to see that KKR keeps its promise to treat the employees well.

In November, Taiwan’s Fair Trade Commission (FTC) approved the acquisition, saying it did not see any market competition issues arising from the deal.

LCY Chemical posted a loss per share of NT$9.76 in 2014 because of the adverse effect of the explosions on its business.

But its EPS recovered to NT$11.69, NT$4.65, and NT$4.20 in 2015, 2016, and 2017, respectively.

It posted EPS of NT$2.83 in the first nine months of 2018, compared with NT$3.32 over the same period last year.

By Liao Yu-yang and Frances Huang