LCY Chemical Corp (李長榮化學), which makes petrochemical products, yesterday said that it will enter talks with Kraton Performance Polymers Inc over a merger and will possibly revise the terms of the deal, which was signed by the two companies earlier this year to form a joint venture to make styrenic block copolymer.
The company’s remarks came after it received a notification from the US company a day earlier, which said that Kraton’s board of directors intends to withdraw its recommendation to its shareholders to approve the deal.
According to Kraton, the change of decision was because of declining operating profit of LCY Chemical in the first quarter this year and the downgrade of LCY Chemical’s recent outlook.
LCY Chemical and Kraton announced on Jan. 28 that they had inked an agreement to form a new company, with ownership split evenly between the two.
Kraton said in the notification that its shares declined significantly after Kraton disclosed LCY Chemical’s operating results and outlook on June 24, and it received a negative response from shareholders.
On June 24, Kraton’s shares dropped 16.72 percent to US$21.53, from US$25.13 the previous day.
Kraton said LCY Chemical has five business days to request talks with Kraton to renegotiate the deal.
Kraton shares rose 1.58 percent to US$22.39 on Monday.
“Based on our understanding, Kraton sent the notification yesterday because their shareholders were not satisfied with the terms,” LCY Chemical spokesperson Abby Pan (潘俐霖) said by telephone yesterday. “However, we are still not sure how they will propose to change the deal.”
Pan said LCY Chemical would try to ascertain more about Kraton’s concerns and respond to them in the interests of its shareholders.
Last quarter, LCY Chemical posted losses of NT$229.96 million (US$7.69 million), or 0.27 per share, down from a profit of NT$539.02 million, or NT$0.61 per share, the previous year, according to the company’s filing to the Taiwan Stock Exchange.
LCY Chemical registered operating losses of NT$489.21 million last quarter, down from operating profit of NT$150.58 million the previous year, the filing said.
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