Da Dong-seok, Vice President of LG Chem, "Physical Division Does Not Harm Shareholder Interests"

[Asia Economy Reporter Park So-yeon] Cha Dong-seok, Vice Chairman and Chief Financial Officer (CFO) of LG Chem, stated regarding the physical division of the battery business that "the surviving company will hold 100% of the shares of the divided company, so it does not harm the interests of existing LG Chem shareholders."

On the 17th, LG Chem released a press statement reporting that Vice Chairman Cha held an emergency conference call the previous day to make this announcement.

Vice Chairman Cha explained, "Rather, I judged that this decision has the advantage of enhancing shareholder value through the focused growth of the physically divided company," adding, "Even if we proceed with an initial public offering (IPO) immediately, it will take about a year, and the usual proportion is around 20-30%."

He added, "LG Chem will hold an absolute shareholding ratio," which is interpreted to mean that LG Chem will hold more than 70% of the shares.

Vice Chairman Cha emphasized, "Among various options, large-scale fundraising is possible through the listing of the newly established battery company, and by utilizing these funds, large-scale investments can be made in the battery business, thereby strengthening the scale and profitability of the battery division in the global market."

He also said, "The IPO can serve as a background for greater growth of the battery business, and naturally, it will be reflected in the shareholder value of the surviving company, LG Chem, so ultimately, it is expected to have a positive effect on LG Chem's stock price."

Earlier, news about LG Chem's plan to spin off its battery business caused its stock to fall 5.37%, resulting in an 11.16% drop over two days.

In comparison, Samsung SDI (-0.89%) and SK Innovation (-0.32%) closed lower amid a general market downturn with the KOSPI down 1.22%, but did not experience a sharp decline like LG Chem.

The difference in stock price movements among the three battery companies, which usually move in the same direction, appears to be due to small shareholders opposing LG Chem's spin-off plan and shifting to other battery stocks.

On the same day, LG Chem held an emergency board meeting and resolved to physically split its battery division, establishing a new company dedicated to the battery business called 'LG Energy Solution (tentative name),' set to launch on December 1.

The new company will be a 100% subsidiary of LG Chem and will raise large-scale funds necessary for the battery business through an IPO and other means in the future.

Many small shareholders argue that they invested in LG Chem based on the prospects of the battery business, and if the 'core' battery business is spun off, their investment loses its meaning.

In particular, unlike the spin-off method where existing shareholders receive shares of the spun-off battery company (a type of equity division), in the case of a physical division, existing shareholders do not receive any shares of the battery company, raising concerns that they may be excluded from the growth of the battery business.

Additionally, an individual investor filed a petition to the Blue House requesting protection against damages to individual investors caused by LG Chem's physical division.

The petitioner stated, "I invested in this company thinking it was related to big deals, electric vehicles, and batteries, but if the spin-off occurs, it means we have invested in a completely different chemical-related stock, and the resulting losses cannot be compensated anywhere."

They continued, "Cancel the physical division and consider an equity division so that shareholders do not suffer losses, or if the physical division proceeds, propose measures to restore shareholder damages before moving forward."

In response, some in the securities industry have positively evaluated that the battery spin-off could be an opportunity for overall corporate value growth of LG Chem headquarters and the battery business.

Park Yeon-ju, a researcher at Mirae Asset Daewoo, observed, "The stock price adjustment is due to doubts about whether the value of the spun-off battery business will be higher than the current value and concerns that investors might buy battery stocks and sell the parent company’s shares."

However, she forecasted, "The battery spin-off is undoubtedly positive for strengthening mid- to long-term business competitiveness and recovering valuation. The value of the battery business is likely to grow larger, and it will have a positive effect on LG Chem's stock price."

This content was produced with the assistance of AI translation services.