In step toward IPO, LG Chem to split off electric-car batteries
South Korean petrochemicals maker LG Chem Ltd. will split off its electric-vehicle battery business into a separate entity, seeking to carve out value as global EV demand increases.
The battery business, to be called LG Energy Solution Ltd., will be 100 percent owned by LG Chem and be separated as of Dec. 1, the company said in a regulatory filing. LG Chem is weighing an initial public offering for the unit, with a decision to be made later. A shareholder meeting to seek approval will be held on Oct. 30.
Batteries are LG Chem’s second-biggest business after petrochemicals. The company also makes advanced materials for technology and pharmaceutical products.
The move lets LG Chem put more focus on its fastest-growing business, while allowing investors to place targeted bets on its batteries. LG Chem is predicting annual revenue growth of more than 30 percent for the unit as key customers such as Tesla Inc. and Porsche Automobil SE boost EV sales.
“With the split, the company can focus on the battery business and will be able to enhance its management efficiency that will lead to better value for shareholders,” LG Chem said in a separate statement. “The new unit will be able to raise funds through its operations as demand for EV cars are on the rise.”
The company has grabbed the battery-market lead this year, overtaking China’s Contemporary Amperex Technology Co. Ltd. and Japan’s Panasonic Corp., according to SNE Research. LG Chem held 25.1 percent of the market in the first seven months of 2020 as sales almost doubled to 13.4 gigawatt hours, SNE said. That compared with a 10.6 percent share a year ago.
LG Chem expects the unit’s sales to grow to $26 billion in five years, from a projected 13 trillion won this year. The division’s second-quarter operating profit of $133.5 million was the biggest since the fourth quarter of 2018.
The company has plants in South Korea, Poland, the U.S. and China and is expanding production capacity. It said in July that it expects battery capacity to reach 100 GWh this year and 120 GWh in 2021.
LG Chem agreed last year to set up a 50-50 venture with Geely Automobile Holdings Ltd.’s unit Shanghai Maple Guorun Automobile Co. to produce and sell batteries.
In December, it agreed with General Motors Co. to jointly invest $2.3 billion in a new EV battery plant to be built in Lordstown, Ohio.
The South Korean company has a market value of about $39 billion, compared with $66 billion for CATL and $23 billion for Panasonic.