LG Chem to spin off EV battery business

LG Chem to spin off EV battery business

South Korean chemical firm LG Chem plans to spin off its electric vehicle (EV) battery business into a separate entity by December. It said it is seeking to capitalise on rising interest in the sector as global demand for electric vehicles rises. The new subsidiary will be named LG Energy Solution and aims to achieve a revenue of US$25.5 billion or more by 2024, said the firm.

The business will include LG Chem's small batteries used in smartphones and laptops and its energy storage systems, as well as its vehicle batteries. LG Chem will own 100% stake in LG Energy Solution after the spinoff. It said it was considering whether to pursue a separate listing for the battery unit.

LG Chem is a leading player in the EV battery market, accounting for around 25% of market share. The company supplies many global automakers including Hyundai Motor, Kia Motors, GM, Ford, Volkswagen, Renault and Volvo.

The move comes at a right time. The global EV battery market is expanding quickly. McKinsey, the consultancy, has projected that by 2040 battery demand from EVs produced in Europe will reach 1,200 gigawatt-hours/year, compared with 25.5Gw/h last year. Projected battery demand from EVs produced in Europe is more than five times the volume of currently confirmed battery projects in Europe, according to McKinsey.

While petrochemicals generate more than half of LG Chem’s revenue, EV batteries are the business with the most potential. Last year, batteries were the company’s second largest revenue source, comprising 29%. In the April-June period, the battery unit reported its largest operating profit of US$132.6 million after losing money for nearly two decades. LG’s EV battery business first saw profits in the fourth quarter of 2018 but went back into the red afterwards.

"This is the right time for the spinoff as the battery industry is growing rapidly and profits from the EV battery sector are increasing," said the company. "With the spinoff we can focus on a specialised business sector as well as improve efficiency in management, boosting values for the company and shareholders."

Regarding this corporate spin-off, LG Chem said: “The corporate spin-off will make it possible to focus on the specialised business areas and enhance management efficiency, thereby upgrading corporate value and stockholder value.”

Regarding the physical division method that will be used, it was stated, “Improved corporate value through the growth of the new corporation will also have a positive impact on the mother company, and we also considered the advantages from the synergy effects of the two companies such as R&D cooperation as well as association of battery materials businesses such as anode materials.”


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