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Battery spin-off

LG Chem shareholders approve plan to split off battery business

Oct 30, 2020 (Gmt+09:00)

LG Chem Ltd. shareholders have approved the South Korean chemical maker’s plan to hive off its battery business, paving the way for the standalone entity to go public and raise funds for costly expansion.

LG Chem, the world’s largest electric vehicle battery maker, said on Oct. 30 that 82.3% of votes represented at its extraordinary general meeting were in favor of the split plan.

The approval is a victory for LG Chem management who faced opposition to the spin-off from some investors, including its second-largest shareholder National Pension Service (NPS).

“We understand some of our shareholders expressed concerns over the battery spin-off,” LG Chem Vice Chairman Shin Hak-cheol said at the shareholder meeting.

“We’ll do our best to make the new company the world’s top battery manufacturer, while at the same time enhance the competitiveness of existing businesses such as petrochemicals, bio and advanced materials.”

Shares of LG Chem shed 6.1%, the biggest percentage drop in four months, to close at 611,000 won on Friday as some disgruntled individual investors dumped the stock. The broader Kospi market ended down 2.6%.


DISGRUNTLED RETAIL INVESTORS

Retail shareholders have been upset that LG Chem is taking away the battery unit without offering any stock in the new entity as compensation. If the new company, tentatively named  LG Energy Solutions, goes public, individual investors will have to subscribe to an IPO, which may take place in late 2021 or early 2022.

LG Chem said the battery company, to be launched on Dec. 1, will first become a wholly owned subsidiary, and then up to 30% of its shares may be listed on the Seoul bourse and, possibly, in overseas markets as well.

LG Chem Vice Chairman Shin Hak-cheol speaks at the shareholder meeting on Friday

The decision will allow LG Chem to secure capital for battery business expansion as it needs at least 3 trillion won ($2.6 billion) a year for EV battery-related facility investment.

LG Chem supplies batteries to major global EV makers, including Tesla, GM and Volkswagen, as well as local automakers Hyundai Motor Co. and Kia Motors Corp.

Write to Jae-Kwang Ahn at ahnjk@hankyung.com

In-Soo Nam edited this article.

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