LG Chem will split-off its battery business. The company held a board meeting on Thursday and decided on the matter to increase company and shareholders’ value, it said.
The matter will go through vote on its extraordinary shareholders’ meeting on October 30. After the motion is approved, the company, tentatively called LG Energy Solution, will inaugurate on December 1, LG Chem said.
The newly formed subsidiary will be wholly owned by LG Chem.
Battery industry was growing extremely fast and structural profit creation was beginning full-scale at the moment, which makes it an apt time for the split-off, the South Korean conglomerate said.
Splitting off the business will allow it to focus on its industrial sector and increase management efficiency, which will result in increase company and shareholders’ value, it added.
The new company will contribute in the value of its parent company, LG Chem, and the pair will collaborate in research and development, the company said. There will be synergy between LG Chem and LG Energy Solution in areas such as battery materials, especially anode, it added.
The new company will aim to post over 30 trillion won in sales by 2024. It aims to be a world leading energy company focused on battery. The new company is expected to post 13 trillion won in sales this year.
On listing the new company, LG Chem said nothing has been decided on the matter and it will continue to review the option. The new company can use its own cash flow from its business activity and LG Chem will own a 100% stake in it as well that gives it many option to secure funding.
Record Q2 profits
LG Chem posted its highest operating profits to date from its battery business in the second quarter this year. The business has over 150 trillion won in remaining orders and is spending over 3 trillion won a year on expanding related facilities __ this increased its need to secure cash when need be.
The split-off will make this easier. Each businesses will have its own financial structure that will allow faster-decision making and flexiblility to market situations.
LG Chem said the split-off will allow each of its businesses to be valued on their own merits. The new company will also add shareholders value to the parent company, it stressed.
LG Chem plans to have the new subsidiary not only focus on producing and selling battery materials, cells and packs but foster battery care, lease, charging and recycling as well for an E-platform that offers services for a battery’s whole lifetime.
The remaining petrochemical, material and bio businesses in LG Chem will focus on becoming the world’s top five chemical company.