[IPO] 'Different from LG Ensol' LG CNS Heats Up Competition Among Major Securities Firms for Lead Underwriter Selection

[Image source=Yonhap News]

[Asia Economy Reporter Park So-yeon] As LG CNS begins the process of selecting underwriters for its initial public offering (IPO), fierce competition among securities firms is anticipated. Previously, during the listing of LG Energy Solution (LG EnSol), LG Group chose KB Securities instead of the traditional IPO powerhouses Mirae Asset Securities, NH Investment & Securities, and Korea Investment & Securities. Market attention is now focused on which securities firm LG Group will partner with for this IPO.

According to the investment banking (IB) industry on the 4th, LG CNS sent out a Request for Proposal (RFP) for selecting IPO underwriters to domestic and international securities firms on the 2nd. They plan to hold competitive presentations (PT) this month to select the underwriters and coordinate the timing of the listing. The listing is expected to take place next year. The industry estimates the company’s valuation to be between 5 trillion and 7 trillion KRW. For reference, Samsung SDS, Samsung Group’s IT services company, had a market capitalization of about 11.5 trillion KRW as of 10:30 AM on the same day.

Earlier, during the record-breaking IPO of LG EnSol in January, LG Group thoroughly excluded the three major firms?Korea Investment & Securities, NH Investment & Securities, and Mirae Asset Securities?from the underwriter selection. Instead of securities firms with extensive IPO experience, LG selected KB Securities, which had relatively less IPO experience, as the lead underwriter. Daishin Securities and Shinhan Investment Corp. were chosen as joint underwriters. Mirae Asset Securities participated only as an underwriter.

At that time, the absence of traditional IPO powerhouses from the LG EnSol underwriter list became a hot topic in the securities industry. The industry attributed the exclusion of NH Investment & Securities and Korea Investment & Securities to their track records of listing multiple SK affiliates, which are competitors of LG Group. Since establishing a relationship through an IPO often leads to subsequent investment banking (IB) business, there was a high risk of conflicts of interest.

NH Investment & Securities participated as the lead underwriter for SK Biopharm in 2020 and SK Bioscience in 2021. This year, it was selected as the lead underwriter for the listings of One Store and SK Telecom’s subsidiary SK Shieldus. Korea Investment & Securities led the listing of SK Group’s SK REITs last year and co-led the listing of SK Innovation’s subsidiary SK IET. Coincidentally, at the time of LG EnSol’s underwriter selection, Mirae Asset, Korea Investment & Securities, and NH Investment & Securities were all involved in the SK IET listing as underwriters or part of the underwriting syndicate.

There is also a view that the close business relationship between KB Securities and LG Group played a role. KB Kookmin Bank, affiliated with KB Securities, has been providing LG Chem with continuous long-term loans. KB Securities is also LG’s bank for short-term won currency borrowing and ranked first in bond underwriting performance for LG Chem last year.

There is analysis that the current LG CNS IPO process will be somewhat different. Unlike companies engaged in fierce global competition in secondary batteries and bio sectors, LG CNS, which provides IT services to group affiliates, has no particular reason to exclude major firms. Since there is no conflict of interest issue with major firms acting as underwriters, traditional IB powerhouses are expected to compete fairly without advantages or disadvantages.

An IB industry insider said, "Unlike LG EnSol, LG CNS has fewer conflict of interest issues, so LG Group may make a different decision. It is highly likely that the choice will be based strictly on which securities firm can provide the best valuation."

Meanwhile, LG CNS provides system construction, operation, and cloud services based on software technology accumulated over 30 years. Recently, it has aggressively invested in AI voice synthesis, de-identified data, and user experience consulting. Last year, sales increased by 23.3% year-on-year to 4.1431 trillion KRW, and operating profit rose by 33.5% to 328.6 billion KRW.

When Macquarie PE acquired LG CNS shares in May 2020, the company’s valuation was about 2.8 trillion KRW. Currently, LG CNS’s valuation in the over-the-counter market is formed at around 5 trillion to 7 trillion KRW. The largest shareholder is LG Corporation, holding 49.95% of shares. The second largest shareholder is financial investor (FI) Macquarie PE (Crystal Korea LLC), owning 35.00%. Koo Kwang-mo, chairman of LG Corporation, holds 1.12%.

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