LCY Chemical Corp (李長榮化學), which makes petrochemical products, yesterday called off a deal with US-based Kraton Performance Polymers Inc which was set to be a joint venture making styrenic block copolymers.
The decision came after the US company informed LCY Chemical on Wednesday that its board would not recommend its shareholders to approve the transaction.
Based on the deal inked on Jan. 28, LCY Chemical would have spun off its styrenic block copolymer unit to form a new company in Texas, and LCY Chemical and Kraton would both have had a 50 percent stake in the joint venture.
LCY Chemical yesterday said it had sent a notification to Kraton to cancel the deal.
Kraton is to to pay a fee of US$25 million to LCY Chemical for terminating the deal, LCY Chemical said.
The termination of the deal comes as shares in LCY Chemical have continued to fall by the daily 7 percent maximum for the sixth consecutive session amid concerns over its role in the gas pipeline blasts that rocked Greater Kaohsiung on Thursday last week.
One of LCY’s underground pipelines used to transport propylene to its plant in Dashe (大社) is believed to be the cause of the explosions, according to the city government.
Yesterday, Greater Kaohsiung’s Economic Development Bureau demanded that the plant in Dashe be shut down so that the company can conduct a comprehensive review of its manufacturing facilities and the safety of its pipelines within and outside the plant.
“We are fully prepared to cooperate with the Greater Kaohsiung government to inspect our equipment and improve our safety standards so that we can protect the lives and properties of citizens in the local vicinity,” the company said in a statement yesterday.
LCY Chemical estimated that its revenue would decline by NT$51 million (US$1.7 million) a day with the closure of the plant because of a reduction in the production of polypropylene.
“However, as a listed company, we have to be responsible for our shareholders and take care of our 5,000 employees and their family members, so we hope the Kaohsiung government can allow us to resume operations immediately after we have finished improving our facilities and handed over a plan to renovate our pipelines,” the statement said.
The company also decided yesterday that it would raise the deposit in its new account at CTBC Bank (中信銀行) to NT$650 million from NT$500 million to cover any compensation it might have to pay to the victims of the accident.
Shares in LCY Chemical fell 7 percent to NT$16.25 yesterday in Taipei trading. Since Friday last week, the company’s stock has plunged by 35 percent, cutting the company’s market capitalization by NT$7.46 billion to NT$13.86 billion as of yesterday.
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