LG Chem Battery Spin-off Depends on Foreign Investors

[Asia Economy Reporter Park So-yeon] The National Pension Service (NPS) has decided to vote against LG Chem's plan to spin off its battery business, putting a brake on LG Chem's roadmap. Although NPS is the second-largest shareholder of LG Chem, its stake is not very large, but due to strong opposition from minority shareholders, LG Chem's fate depends on the voting intentions of foreign investors who hold about 40% of the shares.

According to industry sources on the 28th, the NPS held a trustee responsibility committee meeting the day before and resolved to oppose LG Chem's physical spin-off of its battery business. The committee stated the reason for opposition as, "While we agree with the intent and purpose of the spin-off plan, we judged that there are concerns about the dilution of share value and potential damage to shareholder value of the NPS."

This decision by the NPS is interpreted as being mindful of the backlash from minority shareholders. After LG Chem decided on the physical spin-off, individual investors strongly opposed it, even submitting a petition to the Blue House. In response, LG Chem actively sought to appease shareholders by announcing extraordinary measures, such as committing to pay a cash dividend of at least 10,000 KRW per common share for three years.

In the securities industry, since the NPS's stake is around 10%, which is not high, it is expected that unless a large number of foreign investors with a high shareholding oppose the spin-off, the proposal is unlikely to be rejected. LG Chem's largest shareholder is its holding company LG, which holds 30.06%. Next is the NPS with 10.28%. Foreign investors hold 38.08%, while institutional investors hold 8%, and individual investors hold 12%.

It is also advantageous for LG that most major domestic and international proxy advisory firms have expressed support. Major proxy advisory firms, including ISS (Institutional Shareholder Services), the world's largest proxy advisory firm, Glass Lewis, the Korea Corporate Governance Service, and Daishin Governance Research Institute, have mostly issued favorable opinions. Since foreign and institutional investors often follow ISS's recommendations in their decision-making, the view that the spin-off plan will pass smoothly is dominant.

LG Chem plans to hold an extraordinary general meeting of shareholders on the 30th. The physical spin-off requires a special resolution, which means that at least two-thirds of the voting rights of shareholders attending the meeting and at least one-third of the total issued shares must approve the proposal.