LG Chem shareholders on Friday approved a plan to separate its battery business into a new company, paving the way for a potential public listing to finance expansion.
The unit, which will be launched on Dec. 1, will first become a wholly-owned subsidiary tentatively named LG Energy Solutions, and then up to 30% of the company’s shares may be listed in an initial offering in about a year.
LG Chem is the world’s top battery maker supplying Tesla Inc and General Motors Co.
“While the battery business is expected to post enormous growth, competition is intensifying from not only other battery makers but automakers,” LG Chem Chief Executive Officer Hak Cheol Shin told a shareholder meeting in Seoul.
“We have decided to separate our battery business to better optimise our management in today’s fast-changing market environment.”
More than 82% of LG Chem shareholders who attended the meeting voted in favour of the plan, the source said. LG Chem declined to comment.
“With the split-off of the battery business, we can use various fundraising options to expand investments at the right time, and based on this we can secure a clear global No.1 position by widening the gap with rivals,” LG Chem Chief Financial Official Cha Dong-seok said.
The company’s growth was constrained by rising debts as a result of a sharp increase in capacity investments, he added.
Shares of LG Chem closed down 6.1% versus a 2.6% fall in the benchmark KOSPI.
Asked about selling stakes to strategic investors in the run-up to the IPO, Shin told Reuters the company was reviewing various options.
Hwang Yu-sik, an analyst at NH Investment & Securities, said that as a standalone company the battery business would be able to better raise money including through an IPO to expand its production capacity.
South Korea’s National Pension Service (NPS), LG Chem’s No.2 shareholder with a 9.96% stake, voted against the split-off plan having earlier raised concerns about damage to shareholder value.
Reporting by Heekyong Yang and Hyunjoo Jin; additional reporting by Joyce Lee; Editing by Stephen Coates