LG Chem woos shareholders with portfolio overhaul plan

LG Chem's researchers test electronic materials in this undated photo. Courtesy of LG Chem

LG Chem said Monday it will bolster its electronic materials business in an effort to double revenue from the segment to 2 trillion won ($1.3 billion) by 2030 from the current 1 trillion won.

On the same day, CEO Kim Dong-choon of the company made his first treasury share purchase since taking office last November, disclosing that he bought 336 common shares on Wednesday for about 99.7 million won.

The announcements came a day before LG Chem’s regular general shareholders’ meeting, where the company will face a proxy battle with Palliser Capital. The British activist hedge fund has called on the Korean chemical maker to boost shareholder value by selling part of its stake in LG Energy Solution (LGES), its battery manufacturing subsidiary.

Under its planned business portfolio restructuring, LG Chem aims to preemptively secure material technologies related to semiconductors, electronic devices and next-generation displays, with a stronger focus on higher value-added businesses.

LG Chem CEO Kim Dong-choon

Emphasizing that Kim built his career over three decades in LG Chem’s semiconductor, electronics and advanced materials divisions, the company said he is leading the reform drive.

“LG Chem has swiftly transformed its business portfolio from petrochemicals to advanced materials faster than any other company,” Kim said in a press release.

“Building on its strong focus on next-generation materials, LG Chem will devote all its capabilities and technologies to become a technology-driven, high-value advanced materials company.”

Following disclosure of his share purchase, LG Chem said the move reflects Kim’s intent to ensure the company’s long-term growth and strengthen shareholder value.

In the fourth quarter of last year, LG Chem posted an operating loss of 413.3 billion won due to sluggish performance in its petrochemical, advanced materials and battery businesses. The company recently shut down one of its naphtha cracking centers due to a supply shortage stemming from the war in Iran.

With its stock price remaining weak, Palliser has asked shareholders to support its proposed amendments to LG Chem’s articles of association, which would allow nonbinding advisory shareholder proposals at shareholders’ meetings and the appointment of a lead independent director.

If the proposals pass, shareholders would later vote on Palliser’s suggestions to disclose discounts to net asset value, review executive compensation and accelerate the monetization of LG Chem’s stake in LGES.

Although Palliser has received support from several global pension funds and proxy advisory firms, the National Pension Service announced it will oppose the proposals, expressing concern that they could restrict the board’s authority.

The state-run pension fund is LG Chem’s second-largest shareholder, holding an 8.56 percent stake. LG Group’s holding company, LG Corp., is the largest with a 34.95 percent stake.

Given this structure, Palliser is unlikely to prevail in the upcoming vote.

Still, LG Chem appears determined to defeat the activist fund by a wide margin to defend its new leadership, particularly as the government pushes policies favoring minority shareholders.

After Palliser launched its campaign last October, LG Chem said in January it would cut its stake in LGES to 70 percent from 79.4 percent over the next five years.

Last month, the company appointed an outside director to chair its board for the first time, saying the move would strengthen the board’s independence and enhance management transparency.