LG Accelerates Engine of Asia’s Green Auto Capital

Reuters
Reuters

HONG KONG (Reuters Breakingviews) – Asian capital markets are ready to fire on all cylinders for the electric car boom. LG Chem kicks off the regional frenzy with its $10.7 billion battery spinoff. For now, investors have good reason to get started.

LG Energy Solution’s upcoming debut in the Seoul market puts it in pole position to be Asia’s largest initial public offering for 2022. The unit, which supplies Tesla and others, is on track to set the stock prices at the high end of the range, or 300,000 won ($251). ), according to financial publication IFR, for a valuation of around $60 billion. Just $200 billion Contemporary Amperex Technology, or CATL, would be a bigger pure-play battery maker.

More such deals are being rolled out as Asian supply chains scramble to keep up with rising electric vehicle sales. According to Bank of America analysts, battery demand is expected to more than quadruple to 1,556 GWh by 2025. High initial research and development costs, as well as rising prices for lithium, nickel and cobalt further stretch the balance sheets.

LG will closely follow compatriot SK On, which is preparing to raise $2.5 billion in a pre-IPO funding round this year, according to local media. The company recently unveiled an $11.4 billion joint investment plan with Ford Motor to increase battery capacity in the United States.

In China, the world’s largest electric vehicle market by sales, CATL is targeting a $7 billion equity private placement, while China Lithium Battery Technology is eyeing a $1 billion offering in Hong Kong. Overall, at least $32.5 billion in fundraising from Asian electric vehicle companies is underway, IFR estimates. Sony is among many others whose aspirations in the industry also need money.

Valuations are turbocharged. CATL, for example, is trading on a sparkling 64x figure forecast for 2022, according to Refintiv, while Tesla’s 100x multiple is setting a stunning pace. And unlike Chinese tech, where recent clampdowns have weighed on growth prospects, the global race to net zero means governments are pushing fund managers to seek greener options. For the electric vehicle sector in Asia, it should be easy to fill the pools of capital.

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BACKGROUND NEWS

– South Korea’s LG Energy Solution opened books to investors on Jan. 3 to raise up to 12.8 trillion won ($10.7 billion) in the country’s largest initial public offering.

– The company will sell 34 million new shares at 257,000 won to 300,000 won per share. Parent company LG Chem will also sell 8.5 million secondary shares. At the top of the price range, LGES will be valued at 70.2 trillion won ($58.5 billion) on a fully diluted basis.

– The shares are expected to list on January 14.

(Editing by Jeffrey Goldfarb and Katrina Hamlin)

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