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NPS says no to LG Chem’s battery split-off, but can it stop it?

LG Twin Tower in Seoul (Park Hyun-koo/The Korea Herald)
LG Twin Tower in Seoul (Park Hyun-koo/The Korea Herald)

South Korea’s National Pension Service said Tuesday it will vote against LG Chem’s plan to carve out its battery business into a wholly-owned subsidiary LG Energy Solution, though the state pension fund’s opposition is unlikely to hinder the move.

The split-off, which awaits a final approval at a shareholders’ meeting set for Friday, requires support from more than two-thirds of shareholders in attendance and one-third of outstanding shares. The NPS is the second-largest shareholder with some 10 percent stake, next to LG Group’s 30 percent. Foreigners control 40 percent, while and domestic retail investors and institutions own 10 percent.

“Though we understand the cause and purpose behind the split-off, we have concluded that the move might undermine shareholder value and dilute the equity value,” NPS said in its announcement.

However, experts say NPS’ impact on the split-off is minimal.

“Prior to NPS’ opposition, global proxy advisers such as Institutional Shareholder Services and Glass Lewis announced their support for LG Chem’s split-off. Considering that foreign investors typically follow the opinion of major proxy advisers, it’s unlikely the split-off won’t be passed,” said said Hwang Yoo-sik, an analyst at NH Investment & Securities.

ISS and Glass Lewis, which are world’s leading two proxy advisers, vote corporate ballots, called proxies, on behalf of investor clients and make recommendations on matters ranging from executive pay to climate change.

After the split-off, LG Chem aims to take LG Energy Solution public and sell off 20-30 percent of the subsidiary to raise funds for the expansion of its booming battery business. Retail investors, many of whom invested in LG Chem for the battery business, oppose the split-off as less appealing business divisions – petrochemicals, advanced materials and life sciences -- will be left in LG Chem.

By Kim Byung-wook (