South Korea's National Pension Service decided Tuesday to oppose LG Chem Ltd.'s plan to spin off its battery business at a shareholders' meeting later this week.

In September, LG Chem, the country's leading chemical company, announced a plan to separate the battery business to better cope with growing demand for electric vehicle batteries.

The company plans to hold a shareholders' meeting for approval on Friday.

The state pension fund, the second-largest shareholder of LG Chem with a 10.2 percent stake, said it decided to vote against the plan at the meeting.

"We understand the intention and purpose of the company's spin-off plan but concluded that the move could undermine the NPS' shareholder value," the pension fund said.

Minority shareholders of LG Chem have cast similar views, claiming that their investment in the company would have no meaning if the battery business is separated.

LG Corp. and affiliated persons own 34.17 percent of the company as of the end of June, while investors with less than 1 percent stakes, including foreign investors, hold a combined 54.33 percent.

The passage of the plan requires approval by more than two-thirds of shareholders in attendance and by one-third of outstanding stocks.

The proposal is unlikely to be voted down unless foreign investors, whose combined stakes are about 40 percent, oppose it en masse, but the possibility of disapproval cannot be fully ruled out, industry watchers said.

LG Chem voiced regret over the NPS' decision.

"The planned spin-off is aimed at fostering a new world-class energy solution company with the battery business and raising shareholders' and corporate values," the company said.

"We plan to actively communicate (with shareholders) until the meeting." LG Chem said it is targeting launching the new entity -- tentatively called LG Energy Solutions and to be wholly owned by LG Chem -- on Dec. 1.

LG Chem's operating profit reached a record high of 902 billion won ($799 million) in the third quarter, up 158.7 percent from a year earlier, on the back of robust sales of its petrochemical and EV battery units. (Yonhap)