January 27, 2022

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LG Energy Raises $10.7 Billion in South Korea’s Biggest IPO

(Bloomberg) — LG Energy Solution priced shares to raise 12.75 trillion won ($10.7 billion) in South Korea’s biggest initial public offering, setting aside concerns about battery fires that led to a mass recall of Chevrolet Bolt electric cars.

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At 300,000 won apiece, the shares were priced at the top of the marketed range, Seoul-based LG Energy said in a filing Friday, confirming an earlier Bloomberg News report. The deal values the battery maker at about $59 billion, ranking it the third-biggest company on the benchmark Kospi, behind chipmakers Samsung Electronics Co. and SK Hynix Inc.

The offering was 2,023 times subscribed by institutional investors, LG Energy said.

LG Energy is seeking to increase production capacity to meet burgeoning global demand for electric-car batteries and improve the quality of its cells following a $1.9 billion recall of General Motors Co.’s Bolt EVs. It also wants to close the gap with market leader, China’s Contemporary Amperex Technology Co.

LG Energy Comes Out With Fighting Words for CATL Ahead of IPO

With factories in South Korea, China, Poland and the U.S., LG Energy is focused on expanding in the U.S., where giants such as GM and Ford Motor Co. are electrifying their fleets. The company is in talks with Japan’s Honda Motor Co. to build a 4 trillion won plant in the U.S. capable of producing batteries for 600,000 cars a year, the Maeil Business Newspaper reported earlier Friday.

By 2025, almost half of all electric cars made in the U.S. might use LG Energy’s battery cells, according to Hyuk Jin Yoon, an analyst at SK Securities Co. in Seoul.

“LG will be the most important partner for the U.S. electric-car industry,” Yoon said. “Although it’s lagging behind CATL in China, it is leading in the U.S. and working on producing the materials by itself, especially cathodes.”

The recall of more than 73,000 GM Bolts due to the risk their batteries could catch fire led LG Energy to set aside about $920 million in costs and miss third-quarter earnings estimates. The company also replaced its chief executive officer.

The issues doesn’t appear to have damaged relations between the two companies, with GM planning to build its third U.S. battery plant with LG in Michigan at a cost of more than $4 billion, Bloomberg reported in December.

The company plans to automate more of its production processes to reduce human error, new CEO Kwon Young-soo has said.

Parent LG Chem Ltd., which will retain an 81.8% stake in the battery unit, is taking advantage of an IPO frenzy that has swept Korea over the past year. Nine companies that raised at least $500 million in Seoul over the past year priced their share sales at the top of the marketed range, according to data compiled by Bloomberg.

The proceeds from LG Energy’s IPO are bigger than the entire amount raised every year in South Korea other than 2021, Bloomberg data show. It is about 2.5 times larger than the previous record IPO, Samsung Life Insurance Co.’s $4.3 billion offering in 2010.

The sale is also set to be the world’s second-largest in the past 12 months, trailing only electric-truck startup Rivian Automotive Inc.’s $13.7 billion deal in the U.S. in November.

LG Energy’s IPO is being led by KB Securities Co. and Morgan Stanley. Shares will start trading on Jan. 27.

(Updates with the official announcement from LG Energy.)

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