LG Science Park in western Seoul where LG CNS headquarters is located / Courtesy of LG CNS
Software specialist seeks to defy hostile market environment
By Nam Hyun-woo
LG CNS, a software and system integration unit of LG Group, has launched its bid to go public. It aims for a market valuation of 6 trillion won ($4.24 billion).
According to the company, LG CNS submitted its securities registration statement to the Financial Services Commission on Thursday, with the goal of listing on Korea’s benchmark KOSPI in February next year.
The company said it will offer 19.37 million shares to the market and the expected offering price is ranged between 53,700 won and 61,900 won, meaning it seeks to raise an amount between 1.04 trillion won and 1.2 trillion won through the initial public offering (IPO).
It will be the biggest IPO bid since January 2022, when battery maker LG Energy Solution raised 12.75 trillion won through its listing.
When the process succeeds as planned, LG CNS anticipates that its market cap will reach up to 6 trillion won, which will rank the company between Koreas’ top 50 and 60 companies in terms of market cap.
LG CNS provides system development, operation and cloud services based on its software capabilities. Initially, the company was established as an LG Group arm focused on offering such services primarily to affiliates but is now expanding its business to digital transformation, cloud computing, smart factories and artificial intelligence.
Since 2020, the company has been shattering records in its yearly revenues, while operating profit also showed a similar trajectory. Its sales grew 66.8 percent from 3.36 trillion won in 2020 to 5.6 trillion won last year, and the company reported 3.54 trillion won in accumulated sales from January to September this year.
Buoyed by the solid earnings, LG Group promoted LG CNS CEO Hyun Shin-gyoon to president from executive vice president during a reshuffle last month, showing that the group has trust that Hyun will lead the company’s IPO bid successfully.
LG CNS has been looking for the optimal timing for its IPO since 2022, but did not materialize its plan immediately due to the COVID-19 pandemic and global market uncertainties stemming from Russia’s invasion of Ukraine.
Though the Korean financial market is facing mounting downward pressure in the wake of Donald Trump’s second presidency in the U.S. and President Yoon Suk Yeol’s abrupt declaration of martial law and subsequent lifting, the company apparently launched the IPO bid in a view that there will be no other timing.
In doing so, the company reportedly considered its promise to the second-largest shareholder, Macquarie Private Equity, that it would go public before April 2025, allowing the fund to make a lucrative exit.
Reflecting this, the company noted that 50 percent of the shares which will be offered for the IPO will be its existing shares, while the remainder will be newly issued shares. This means that Macquarie will unload its stakes to the market.
The ratio between newly issued shares and existing shares is a key factor in determining the success of an IPO because offering existing shares indicates that current shareholders are making an exit. As a result, the funds raised through the IPO will benefit the exiting investors rather than the company itself.
Due to this, HD Hyundai Marine Solution, which went public in May, saw its share price end up rising 96.52 percent on the first day of its trading, a disappointing increase given that many newly listed stocks doubled or even quadrupled during their debut. HD Hyundai Marine Solution also comprised 50 percent of its offering with existing shares for the exit of private equity KKR.
LG CNS CEO Hyun Shin-gyoon
Reflecting previous cases, LG CNS apparently took a conservative approach in setting its desired price.
The company said in its registration statement that it calculated desired price by comparing the price-earnings ratio of three rival companies — Samsung SDS, Hyundai AutoEver and Japan’s NTT DATA Group — but excluded Accenture from peer group comparison, one of the top players in the same industry, to “enhance comparability.”
“Accenture's market capitalization was approximately 335 trillion won, which is more than 60 times higher than LG CNS’ target market capitalization of 5.2 trillion to 6 trillion won after its listing,” it said.
“LG CNS has grown into a digital leader that innovates business value for our clients based on our 40 years of accumulated IT expertise,” LG CNS CEO Hyun said in a statement. “Through this IPO, we aim to leap forward as a global leader in digital transformation, leveraging our differentiated digital transformation technologies such as AI (artificial intelligence) and cloud.”
English (United States) ·