LG CHEM has announced that it is reviewing the sale of its subsidiary LG Energy Solution's equity, drawing investors' interest regarding the timing of the sale. LG CHEM is restructuring its business model around future materials and is expected to utilize the equity of LG Energy Solution to secure investment resources.
During a conference call on results held on the 7th, LG CHEM officially announced the possibility of selling its equity in LG Energy Solution. LG CHEM is the largest shareholder, holding 81.8% of LG Energy Solution's equity. LG Energy Solution was established in December 2020, following the partitioning of the battery division from LG CHEM.
Chief Financial Officer Cha Dong-seok noted the value enhancement measures for LG CHEM, stating, "We view the equity in LG Energy Solution as a resource that can be strategically used for sustainable growth. We are actively seeking ways to utilize the equity in LG Energy Solution and other assets in a timely manner."
LG CHEM's profitability has declined as its core petrochemical sector faces difficulties. In the second quarter, the petrochemical sector recorded revenues of 4.6962 trillion won and an operating loss of 904 billion won. As of the end of the first half, LG CHEM's debt ratio was 110.7%, an increase of 13 percentage points from the first quarter's 97.7%.
LG CHEM is in the process of selling non-core businesses to replenish its strength. In April, it sold its water treatment filter (water solution) sector for 1.4 trillion won and has restructured its aesthetics division for 200 billion won this month. The Bisphenol A (BPA) division is also attempting to sell.
LG CHEM is conducting large-scale investments to restructure its business. It is building a cathode materials plant in Tennessee, USA, with an annual capacity of 60,000 tons, investing 2 trillion won, and plans to construct an eco-friendly biofuel (HVO·Hydrotreated Vegetable Oil) plant in Seosan with a capacity of 300,000 tons. Shin Hak-cheol, vice chairman of LG CHEM, stated in March, "We are planning capital expenditures (CAPEX) of 2.5 trillion to 2.7 trillion won this year."
LG CHEM is also utilizing its equity in LG Energy Solution. In May, it issued a new exchangeable bond (EB) worth $1.05 billion (approximately 1.4 trillion won) targeting 4,129,409 common shares of LG Energy Solution. If the exchange right is exercised, LG CHEM's equity stake in LG Energy Solution will decrease from the 81% range to the 79% range.
As of the 11th, based on LG Energy Solution's closing stock price (389,000 won), the value of LG CHEM's holdings is approximately 74 trillion won. If LG CHEM sells the remaining equity while keeping a stake that does not impede management control, it could raise over 20 trillion won.
However, with the revision of the Capital Markets Act, executives of listed companies and major shareholders must disclose their equity sale plans in advance, which is a variable. If LG CHEM announces that it will sell shares of LG Energy Solution, there is a high possibility that other shareholders will liquidate their holdings first. If selling pressure increases, the stock price of LG Energy Solution may decline.