Lotte Chemical's Bid for Axiall Could Incite Higher Offer From Westlake

Lotte Chemical has made a bid for Axiall, which rejected Westlake Chemical's updated $23.35 per share offer in April. While Lotte's bid price was not disclosed, the market seems to think it was higher than Westlake's offer because Axiall's shares reacted favorably, trading up 9% on June 7 to over $25. Lotte's shares traded down 3.5%, potentially indicating that its shareholders think the bid would be too high. Lotte's bid increases the probability that Westlake will raise its offer again, which we would view unfavorably unless commensurate synergies were found to justify the higher price. We maintain our $45 fair value estimate for Westlake for now but will cut it if Westlake makes a higher offer that isn't supported by greater synergies.