LG spins battery business into a separate subsidiaryOctober 31, 2020
South Korean company LG has announced its willingness to spin off its electric vehicle battery business into a separate subsidiary to better manage production. The vote on this decision took place during the board of directors of LG Chem, which today includes the battery business.
In addition to electric batteries, the company, part of the LG Group holding, produces industrial materials, filters for water purification, fertilizers, seeds, and develops plant protection products. It is the largest chemical company in the country. In 2009, LG Chem began producing batteries for electric vehicles and today, along with China’s CATL and Japan’s Panasonic, is one of the top 3 largest suppliers of these batteries. Tesla and General Motors are among the buyers of LG Chem batteries.
However, this business is growing, and at the board of directors it was decided to separate it into a separate subsidiary.
“We expect to see tremendous growth in the battery business, and the competition is getting more intense, not even with other battery manufacturers, but also with automakers. Therefore, we decided to split the business to better manage it in an ever-changing market, ”said Hak Cheol Shin, head of LG Chem at the meeting.
The split will take place on December 1, and the newly formed company will be called LG Energy Solutions. Initially, the subsidiary is expected to be wholly owned by LG Chem, but within a year 30% of the shares will go to IPO for further expansion.
According to Reuters, 82% of the company’s owners voted for the separation. Among the opponents of this decision was the National Pension Service of Korea, which owns almost 10% of the shares. Most likely, the reason for this was the predicted drop in the price of LG Chem itself, because 42% of the company’s profits are provided by the battery business.
LG Chem CFO Cha Dong-sok noted that with LG Energy Solutions, they will be able to better use different ways to raise money and do it at the right time to further expand their lead over the competition.
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