LS Group announced on Tuesday its plans to list its subsidiary, Essex Solutions, on the Korean stock market. This move aims to respond effectively to the U.S. power supercycle and boost corporate value. The company intends to raise approximately $375 million to expand its special winding manufacturing facilities.
This announcement directly refutes recent accusations of a split listing. Some critics had argued that Essex’s listing contradicts government efforts to stimulate the stock market and represents an attempt to separate core business operations for subsidiary listing.
In 2008, LS Group invested about $750 million to acquire 100% of Superior Essex, a NASDAQ-listed wire company, through a public tender offer. Since then, LS Group has continued investing in preparation for the electric vehicle era. In April 2024, after acquiring all shares of Furukawa Electric’s magnet wire division, the group vertically integrated its winding operations to establish Essex.
LS emphasized that this listing is not a split listing that dilutes the parent company’s value. Instead, it’s a relisting or inbound listing that introduces previously acquired overseas assets to the Korean capital market for fair valuation. They argue this aligns with the Korea Exchange (KRX)’s policy to attract high-quality foreign companies and globalize the capital market.
LS further explained that this listing is a strategic investment for survival, aimed at capitalizing on the golden opportunity presented by the power supercycle.
Essex produces high-output special windings for electric vehicle drive motors, with major clients including Tesla and Toyota. Recently, demand for special transformer windings (CTC) has surged due to the growth of AI data centers and the need for transformer replacements in the U.S., leading to lead times of 4 to 5 years.
LS stated that expanding special winding manufacturing facilities requires over $375 million in investment. They argue that raising funds through an IPO is crucial to avoid worsening their financial structure through borrowing.
Essex plans to use the $375 million raised from the listing for facility investments in the U.S. If the investment proceeds as planned, the company projects its value could triple by 2030, potentially benefiting LS’s corporate value as well.
LS attributed its past stock undervaluation primarily to excessive payment guarantees and financial support burdens for its subsidiaries. They view this IPO as a decisive step to break the parent company dependency cycle, allowing Essex to raise capital independently and freeing LS from additional guarantee obligations.
The Essex listing will not involve existing shareholders selling shares for cash. Instead, it will issue new shares to inject funds into the company, with all proceeds earmarked for investments in the U.S. facility.
As part of its shareholder return policy, LS announced plans to cancel 1 million treasury shares, representing 3.1% of total issued shares. The company has already cancelled 500,000 shares and plans to cancel the remaining 500,000 in the first quarter of this year.
LS will hold a second investor relations meeting this month to announce additional shareholder return and value enhancement strategies.