Formosa Plastics Group (FPG, 台塑集團), the nation’s largest industrial group, has suspended its plan to dispose of 571.56 million shares of subsidiary Formosa Petrochemical Corp (台塑石化) because of the unit’s declining stock price.
“The termination of the US’ quantitative easing policy and the low money supply in China has caused stock markets around the world to fall, making it unwise for us to sell stock at this moment,” FPG general administration director Ho Shui-wen (侯水文) said by telephone yesterday.
Formosa Plastics Corp (台塑), Nan Ya Plastics Corp (南亞塑膠) and Formosa Chemicals & Fibre Corp (台灣化纖) — three other units of the group — had been set to sell 190.52 million shares, or 2 percent of shares, of Formosa Petrochemical by the end of this month to improve the group’s financial structure, Ho said.
Formosa Plastics Corp USA and Chang Gung Medical Foundation (長庚醫療) will now buy 40 percent of those shares and the remainder will be bought by three brokerage firms, Ho said.
Formosa Petrochemical’s shares have dropped from between NT$80 and NT$90 early this year to NT$70 recently because of the local stock market’s decline, Ho said, adding that FPG could wait for a better time to sell the stock since it did not have a cash problem.
Shares of Formosa Petrochemicals rose 6.09 percent to NT$73.2 yesterday. In the past six months the shares have dropped 13.78 percent.
Taiwan Ratings Corp (中華信評) said the postponed sale would not affect the agency’s ratings on the group and its core units.
“We have not changed our base-case scenario that a slightly improving operating performance and the use of non-debt financing should gradually enhance the group’s credit metrics over the next one or two years,” Taiwan Ratings credit analyst Raymond Hsu (許智清) said in a statement.
Taiwan Ratings, a local arm of Standard & Poor’s, rates Formosa Plastics, Nan Ya Plastics, Formosa Chemicals and Formosa Petrochemical “BBB+” with a negative outlook.
The “negative” outlook means the group’s weak operating performance and its large overseas capital expenditures may make it difficult for it to improve its credit metrics over the next one or two years, Hsu said.
Separately, Formosa Plastics, the nation’s largest producer of polyvinyl chloride, received approval from the Fair Trade Commission yesterday to form a joint venture with Mitsui Chemicals Inc to build a plant in China to produce 5,000 tonnes of electrolyte solution annually. The solution is one of the main components of lithium-ion batteries.
The joint venture will not have significant impact on the domestic lithium-ion battery market, which is open to exports and has a low market barrier, the commission said in its press release.
However, the deal still needs to be approved by the Ministry of Economic Affairs’ Investment Commission because of the size of the investment, Formosa Plastics said.
It plans to invest US$20.5 million to acquire half the shares of the joint venture, which is scheduled to be operational by May 2015, it said.