London-based activist investor Palliser Capital has called on LG Chem, a key chemicals arm of South Korea’s LG Group, to implement changes aimed at improving the company’s market valuation.
Palliser said Monday that it has submitted a proposal to be discussed at LG Chem’s annual general shareholders' meeting scheduled for March. The move follows its announcement in October that it had acquired a stake of more than 1 percent in the chemical materials maker.
While LG Chem recently announced it plans to reduce its ownership stake in LG Energy Solution, a leading battery maker under the group, by nearly 10 percentage points to 70 percent in five years, the fund urged the company to present an updated capital allocation plan that would aim for a larger reduction.
LG Chem currently holds a 79.4 percent stake in LG Energy Solution, which the hedge fund argued is not fully reflected in LG Chem’s market cap.
Since October, Palliser has publicly pressed LG Chem to reduce its ownership and deploy the proceeds to boost shareholder returns.
The fund also called on LG Chem to amend its articles of incorporation to allow shareholders with 0.5 percent stake in the company to submit advisory resolutions.
Though Palliser previously disclosed that it held a stake of more than 1 percent in LG Chem, the fund’s ownership has fallen to 0.67 percent as of the end of last year, according to a recent media report.
The fund further pressed LG Chem to introduce routine disclosure of the company’s net asset value discount, conduct a review of executive compensation, and appoint a lead independent director to better represent outside directors and strengthen engagement with shareholders.
In the proposal, Palliser described the undervaluation as “both illogical and unsustainable,” highlighting shareholders' struggle to understand why LG Chem has not taken proactive measures to address the underperformance of its shares.
“The universally recognized reality is that the market does not properly or accurately credit LG Chem’s very significant stake in LGES, the market value of which is more than 3.3 times the entire market value of the company,” the proposal read.
It further stressed LG Chem has a “clear opportunity” to be a “national champion” in eliminating the “Korea discount.”
Palliser is recognized in Korea for having challenged local conglomerate affiliates such as SK Square and Samsung C&T to take actions to boost corporate value and return the profits to shareholders.
silverstar@heraldcorp.com
