BofA getting closer to LG Energy Solution

This image highlights the growth of the battery industry. Yonhap

By Kim Yoo-chul

LG is getting closer to Bank of America-Merrill Lynch (BofA), after the U.S.-based investment bank was chosen as one of the top underwriters of the planned initial public offering (IPO) of LG Energy Solution (LG Energy).

What seems interesting for LG Energy's pick is that, despite BofA's track record for handling various sizable deals ― such as Hyundai Rotem's IPO back in 2013 ― BofA hasn't handled any local IPOs since 2014, according to local financial sources, Tuesday.

“Among the seven big-name underwriters chosen by LG Energy for its planned IPO, BofA is the only investment bank that has no experience handling local IPOs between 2014 and 2020. Besides Hyundai Rotem's 2013 IPO, BofA only participated as a co-underwriter in Samsung Securities' IPO back 2010. For more than a decade, BofA has only participated in two deals,” one source said.

KB Securities and Morgan Stanley have been named as the top underwriters, while BofA, Citigroup Global Market Securities, Daishin Securities, Shinhan Financial and Goldman Sachs were chosen as the co-underwriters.

LG Energy's planned IPO is valued at 9 trillion won, as its enterprise value was 50 trillion won, and could rise to as much as 100 trillion won given its rapid growth, both in terms of sales and revenue compared to its chief international rivals, such as CATL of China and Panasonic of Japan.

Still, LG said the IPO size and timing haven't been decided on yet, though officials contacted by The Korea Times said LG Energy will go public on the country's main bourse sometime in the third quarter of the year, before a possible Nasdaq listing.

Morgan Stanley, Goldman Sachs and Citi have established solid track records over the last decade. Morgan Stanley was the top underwriter for Orange Life's 2017 IPO valued at 1.1 trillion won, while Citigroup managed the IPOs of SK Biopharmaceuticals and Samsung Biologics.

“BofA may have been credited for its earlier contribution, in terms of handling LG affiliates' moves to unload non-core businesses,” another source said. These non-core businesses include LG Hausys' decision to sell its automotive materials business and LG Display's $600 million worth of convertible bonds (CB) issuance in July 2019, the time when LG was hit hard because of the continued oversupply in the display industry. “But the joining of one of LG Group's firms in the BofA in 2018 is said to have helped the U.S. investment bank to join the LG Energy IPO process,” added the source.

The country's IPO market is expected to increase to 20 trillion won, which could be a record and about quadruple last year's amount. Plus, efforts by the country's top financial regulators to increase the allocation of IPO shares to retail investors this year are expected to spur additional investments, according to fund managers.