IPO to be the next step, at some point in the future?

LG Chem has officially announced that on December 1, 2020, it will split its battery business into a a new wholly-owned subsidiary, tentatively named LG Energy Solutions.

The move is motivated by the desire to enhance corporate value and stockholder value through concentration on the business area of expertise. It's expected to strengthen expertise in the business sector and improve operational efficiency.

"This will be a physical division in which LG Chem will possess all of the stocks issued by the new battery corporation and LG Chem will possess 100% of the non-listed shares of the new corporation."

LG Chem's battery business is expected to achieve revenues of 13 trillion KRW ($11.1 billion) this year, and more than 30 trillion KRW ($25.6 billion) by 2024.

“Cash generated from business activities will be used as the facility investment funds according to the increase of EV demands and since LG Chem possesses 100% of the shares, it will be possible to procure the funds using various methods.”

 

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By the end of 2020, EV battery manufacturing output is expected to exceed 100 GWh annually, and in 2021 it should be at 120 GWh annually. The plants are located in South Korea, U.S., Poland and China with new ones under construction, and existing ones are expanding.

With more than 150 trillion KRW ($128 billion) in orders on hand, the future looks pretty bright and the South Korean company's goal is to become the largest player in the EV battery market (which is already happening).

To make it happen, 3 trillion KRW ($2.6 billion) is invested annually in facilities.

IPO?

After the spin-off, the 100% owned battery corporation may hit the stock market, but it's not decided yet.

"Regarding the IPO (initial public offering) of the new corporation, it stated that “Nothing is confirmed as of now and we plan to continuously review it in the future.”"

We guess that the IPO is just a matter of time, especially since LG Energy Solutions is poised to become bigger than all of the other LG Chem businesses altogether. The company even said that attracting large investments is on the table:

"Through this division, it will be possible to attract large investments, while easing financial burdens by establishing an independent financial structure system for each business sector."