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EV battery IPOs

LG Energy Solution to begin IPO process, eyes H2 listing on local bourse

By Jan 10, 2021 (Gmt+09:00)

LG Energy Solution to begin IPO process, eyes H2 listing on local bourse

LG Chem Ltd.’s battery unit, LG Energy Solution, is set to become this year’s initial public offering blockbuster with its plan to list the company on the local bourse by the end of 2021.

According to investment banking industry sources on Jan. 10, LG Energy Solution will soon send out a request for proposals (RFP) to brokerages interested in managing its planned IPO. The company plans to receive proposals by the end of January and choose lead managers through competition, the sources said.

LG Chem, which launched the electric vehicle battery affiliate on Dec. 1, has said it also considered a Nasdaq listing of LG Energy, but sources said the company is more likely to go public on the Korean bourse due to the legal complexity and costs related to the overseas listing.

Industry officials estimate LG Energy’s enterprise value at 50 trillion won ($46 billion) at the very least and could be worth as much as 100 trillion won, given its fast-growing sales relative to its global peers.

In 2019, LG Chem’s EV battery business posted 835 billion won in sales. Its 2020 revenue is estimated at 1.04 trillion won and is forecast to rise to 1.84 trillion won this year, according to Samsung Securities.

SHARES AT RECORD LEVELS ON HOPES FOR EV TAKE-OFF

Graphics by Jerry Lee
Graphics by Jerry Lee

LG Chem’s share price has been on a steep ascent in the past few weeks on expectations for the take-off of the global electric car and rechargeable battery industries in coming years.

On Friday, LG Chem finished up 3.9% at an all-time high of 999,000 won, raising its market capitalization to 70.5 trillion won.

Despite some objections from major shareholders, LG Chem last year decided to spin off its battery business as a subsidiary and turn it into a publicly trading company to raise funds needed to expand its EV battery investment.

LG Chem executives have said up to 30% of LG Energy Solution’s shares could be offered for public trading. Analysts said LG Chem’s battery division will be more fairly valued by the market if listed separately.

The global EV battery market has been growing rapidly amid the race for automakers to go electric and eco-friendly due to tightened environmental regulations. According to industry tracker IHS Markit, the EV market is forecast to grow at an annual average rate of 25% over the next seven years.

According to market research firm SNE Research, China’s CATL was the world’s top EV battery supplier with its 24.2% market share in the first 11 months of 2020. LG Chem came in second with 22.6%.

AIMS TO MAINTAIN EDGE OVER CHINA’S CATL

Tesla's Model Y electric SUV produced at its Gigafactory Shanghai
Tesla's Model Y electric SUV produced at its Gigafactory Shanghai

LG Energy hopes to raise as much as 20 trillion won from its planned IPO if successful.

With the proceeds, LG plans to expand its production capacity and increase research and development (R&D) investments to maintain its lead over global rivals

According to the EV battery industry, LG Energy is expected to raise its battery production capacity to 156 GWh by the end of 2021, up 30% from 120 GWh in 2020. Its capacity is forecast to rise further to 260 GWh by 2023.

In November of 2020, LG Chem said it was chosen as the sole supplier of EV batteries for Tesla Inc’s latest mid-size SUV Model Y to be manufactured in China as part of its efforts to grow in the world’s biggest electric car market.

BIGGIES IN 2021 IPO PIPELINE

Analysts said LG Energy Solution’s IPO may be coming at the right time, when the local equity market is awash with ample liquidity, pushing the main stock index to fresh highs day in and day out.

If listed this year as expected, it will be the biggest IPO of the year, outsizing other companies set to go public by the end of 2021.

A number of attractive companies valued in the trillion won range are in the 2021 IPO pipeline.

Game developer Krafton Inc. with an estimated company value of as much as 30 trillion won, and two units of the country’s top mobile messaging app Kakao Corp. – KakaoBank and Kakao Pay – are set to make debuts in Korea this year.

The enterprise values of KakaoBank and Kakao Pay are estimated at some 20 trillion won and 10 trillion won, respectively.

Write to Ye-Jin Jun and Man-Su Choe at ace@hankyung.com

In-Soo Nam edited this article.

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