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Business

Kraton May Walk From LCY Merger

by Alexander H. Tullo
July 7, 2014 | APPEARED IN VOLUME 92, ISSUE 27

Because of a decline in market conditions, particularly in China, the board of Kraton Performance Polymers won’t recommend that shareholders approve its merger with the styrenic block copolymer business of Taiwan’s LCY Chemical unless Kraton can renegotiate the deal. The companies agreed to the merger in January. Under terms of the agreement, LCY and Kraton shareholders would each own 50% of the combined company. Kraton CEO Kevin M. Fogarty was still backing the deal only a week before the board’s decision when, in a conference call with analysts, he disclosed that LCY’s business hadn’t recovered from weak demand and overcapacity in China and might not do so until 2016. The LCY business lost $3 million during the first quarter of 2014. Fogarty noted that Kraton will have to pay LCY $25 million if it walks away.

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