LG Chem Arranges Swap on 6,535,939 Shares in LG Energy Solution
Key Facts
LG Chem announced plans to enter into a price return swap contract on 6,535,939 common shares in LG Energy Solution, a move it said would support its financial structure and fund growth investments. The deal runs for two years, and its disclosed value is based on the share's closing price on October 27 of 382,500 won. Proceeds are scheduled to be received on November 27, according to CHOSUNBIZ. A price return swap settles the difference associated with share price fluctuations over the contract term. LG Chem said it would use the funds to improve its financial position, including repaying borrowings, while also providing resources for future investment.
Under the contract, the 6,535,939 common shares are the underlying asset, while the swap runs for two years. The contract mechanism settles the difference associated with changes in the share price, making it different from an outright sale, which ends the economic relationship with the shares once the disposal is completed. The closing price recorded on October 27 provides a reference for the disclosed value, while proceeds are scheduled to be received on November 27. LG Chem's disclosure said the planned disposal period starts on November 27 and ends on December 24, 2026, with the actual date to be determined within that window. The transaction's estimated value is equivalent to 5.31% of the company's consolidated equity for 2025, according to the disclosure published through the Korea Exchange.
The company plans to direct part of the expected cash flows to shareholders, with about 400 billion won, equivalent to roughly 20% of net cash flows after tax, earmarked as potential sources of shareholder returns. The plan includes buying common and preferred treasury shares through a trust contract over about six months. The company said this approach, combining share purchases and cancellations with dividends, marks the first time it has based shareholder returns on buying and cancelling treasury shares rather than relying solely on dividends. LG Chem plans to allocate purchases of preferred shares according to their market value during the contract period. The plan thus combines reducing borrowings, funding investment and returning part of the cash flows to shareholders.
The proposed return ratio differs from a previous deal LG Chem carried out last year, when it sold shares in LG Energy Solution for about 2 trillion won and allocated nearly 10% of net proceeds after tax to shareholder returns. In a separate disclosure dated October 1, 2025, the company said the disposal worth 1.9981 trillion won would reduce its stake in LG Energy Solution from 81.84% to 79.38%. In the current transaction, the company is raising the share of net cash flows after tax set aside for shareholder returns to about 20%, compared with about 10% in the previous deal. LG Chem said proceeds from the 2025 sale were used to reduce loans tied to new businesses, including battery materials and biotechnology. The current disposal follows an earlier approach of using share sales to support the financial position while allocating a defined portion to shareholders.
LG Chem said it would balance the strength of its financial position and its capacity to invest in any future share sales. It added that it would consider buying and cancelling its shares if it believed they were trading below their intrinsic value, while maintaining stable dividends. This comes alongside the current share purchase plan, which will run for about six months through a trust contract and cover common and preferred shares. The current disposal period is scheduled to begin on November 27, 2026, and continue through December 24, while the company has set November 27 as the planned date for receiving the proceeds. These dates remain the announced timeframe for the transaction, as the disclosure said the actual disposal date would be determined within the scheduled period.