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LG Chem’s minority shareholders are up in arms over the company’s split-off of its battery division. The next question is whether the split-off plan will pass the threshold of a general shareholders’ meeting.

On Sept. 17, LG Chem announced that a plan for splitting off its battery project sector had been approved at an emergency board meeting. The split-off is to apply to the automobile battery, small battery, and energy storage system (ESS) sector, with LG Chem to hold a 100% stake in the newly formed corporation. Tentatively named “LG Energy Solutions,” the new corporation is to officially launch on Dec. 1.

The prevailing view among stock market observers is that LG Energy Solutions is likely to be listed next year. In addition to the aim of simply procuring funds, the current equity structure poses many constraints in terms of cooperating with other businesses. With LG Energy Solutions being the sub-subsidiary of a holding company, fair trade law would bar the establishment of a joint venture in South Korea that could be subject to linkage. An LG Chem official said, “In the case of our battery sector, we’re primarily cooperating with global finished automobile companies, so we’re not anticipating any major constraints from having the new corporation as a sub-subsidiary for the time being.” No such constraints apply to overseas corporations, which means that LG Energy Solutions is poised to carry on a joint venture established with the US company General Motors (GM) and others when it is launched.

The outcry from LG Chem’s minority shareholders has been vehement. In contrast with a spinoff, a split-off would leave existing shareholders only indirectly possessing shares in the new corporation. Moreover, their shares are set to shrink with LG Energy Solutions’ future stock market listing. This has led to complaints from shareholders upset that they “invested after seeing the batteries, and have now ended up with only petrochemical stocks.” A message posted on the Blue House petition board on Sept. 16 calling for steps to “prevent damages to individual investors from the spin-off” had obtained over 4,000 signatures by the following day.

LG Chem plans to hold an ad hoc shareholders’ meeting on Oct. 30 to conduct electronic voting to approve the split-off plan. For the plan to pass, it would need approval from over two-thirds of participating shareholders with voting rights, and at least one-third in terms of total stocks issued. Holders of preferred stocks also hold voting rights. LG owns 30.06% of LG Chem, while the National Pension Service owns another 10.51%. Over 110,000 minority shareholders account for more than 50% of equity. But individual shareholders only represented 9.82% as of late 2019; even if the increase this year is taken into account, the percentage is unlikely to reach 20%. LG Chem shares closed at 645,000 won on Sept. 17, down 6.11% from the day before.

By Lee Jae-yeon, staff reporter

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