Global IBs scurry to win IPO mandates for LG Chem’s battery business spin-off
By Sep 22, 2020 (Gmt+09:00)
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Global investment banks are scrambling to win IPO mandates for LG Chem Ltd.’s battery business, which the South Korean company plans to hive off into a separate entity, tentatively named LG Energy Solutions, on Dec. 1.
Big foreign banks have abruptly formed teams dedicated to the IPO underwriting, encouraged after LG Chem hinted last week at a possible dual listing of the new subsidiary on both domestic and overseas bourses, according to investment banking sources on Sept. 22.
“Big investment banks are scurrying to prepare for the mandates. We need to contact the company before an official IPO process kicks off,” one of the IB sources told The Korean Investors.“If we fail to win the mandate, we may have to pack up and leave the country,” another IB source joked.
Market rumors are that some IBs approached LG Chem in the second half of last year when speculation about the battery business' spin-off first arose, he added.
Two global IBs have already submitted in-house reports to LG Chem, estimating the battery unit's enterprise value at 27 trillion-30 trillion won ($23 billion-$26 billion), according to the sources. LG Chem’s market value stands at 45 trillion won as of Tuesday’s market close.
LG Chem’s Chief Financial Officer Cha Dong-seok said during a conference call last week that the company was not ruling out listing the battery business on overseas exchanges.
Another IB source said the electric-vehicle battery maker would seriously consider a US listing for the new subsidiary. In the US stock markets, battery makers’ IPOs are very rare and thus are highly expected to attract hefty investment from funds specializing in environmental, social and governance investments.
Previously, LG Group units have shown no particular preference for certain global banks to advise on its major M&A deals. Its previous advisors for domestic and cross-border transactions varied from Nomura, Credit Suisse, JPMorgan and Merrill Lynch to HSBC.
For legal services, Korean law firm Lee & Ko has already secured the IPO mandate for the battery business, after it lost to two other leading domestic law firms over LG Chem's legal battle with SK Innovation Co. over battery patent infringement.
LG Chem is the world’s top EV battery maker with a 24.6% market share, according to market tracker SNE Research, and supplies rechargeable batteries to global carmakers such as GM, Ford, Renault, Volvo, Audi, Volkswagen and Daimler, as well as Korean automakers Hyundai Motor and Kia Motors.
Write to Jun Ho Cha at chacha@hankyung.com
(Photo: Getty Images Bank)
Yeonhee Kim edited this article
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