LG CNS Plans IPO on Korea Exchange

LG CNS, the IT arm of Seoul headquartered LG Group, is aiming for a peak valuation of $4.1 billion in its initial public offering (IPO), driven by increasing global demand for digital transformation services. This marks the largest IPO within the conglomerate since the 2022 listing of its battery unit.

LG CNS CEO Hyun Shin-gyoon told reporters on Thursday that the company was aiming to strengthen its digital transformation (DX) technology capabilities in AI and the cloud, and actively expand its global business, leveraging this IPO as a stepping stone to become a ‘first mover’ in the global DX market, according to Korean media reports.

The company has already submitted a securities registration statement to the Korea Exchange (KOSPI) last month with KB Securities, the Bank of America (BOFA) and Morgan Stanley as major underwriters.

 LG CNS plans to go public on the main Kospi bourse in February and the total number of shares offered is set at 19,377,190, with a target offering price range between $36.6 and $42.19 per share, he said.

The maximum amount of funds raised would be $410 million, which the company plans to invest in mergers and acquisitions, infrastructure and debt repayment. Half of these shares, or 9,688,595, are existing shares sold by current shareholders, with the main entity being Macquarie Asset Management, which holds a 35% stake in the company.

Macquarie is the second-largest shareholder of LG CNS following the subsidiary’s holding company, LG Corporation, which owns 49.95%.

Fears Allayed

Regarding market concerns about offering existing shares in the IPO, LG CNS Chief Financial Officer Lee Hyun-gyu explained that the modest share price lower than the valuation perceived by the market can alleviate such an issue.

“We did not set the proportion of new shares higher than necessary, considering the company’s current cash reserves,” Lee said.

 The IT solutions company’s revenue has seen a continuous upswing. It posted $3.8 billion in revenue and $32 million won in operating profit in 2023, marking year-over-year increases of 12% and 20%, respectively, the report said.

Another area of concern is the unfavourable environment of the domestic IPO market, influenced by political instabilities and economic challenges.

 On Wednesday, Kbank, an online bank owned by the country’s largest telecom firm KT Corporation, withdrew its IPO plans, citing external and internal market uncertainties.

“Overseas investors in Hong Kong and Singapore are showing interest in the domestic political situation, yet many foreign asset managers have maintained their willingness to invest despite prevailing conditions,” Hyun said.

The company initially attempted an IPO in 2022, but withdrew due to unfavourable market conditions.

In 2023, AI and cloud sectors accounted for 51.6% of LG CNS’s total sales, highlighting the company’s strong focus on these areas. Approximately 40% of LG CNS’s employees are AI and cloud specialists, underscoring the company’s commitment to advancing its technological capabilities.

Following the launch of the AI ​​Center in January last year, LG CNS recently integrated the Cloud Business Division and the Data Analytics & AI (D&A) Division to establish the AI ​​Cloud Business Division. This year, the company will fully implement its ‘Application with AI’ strategy to introduce AI across the entire enterprise.