LG Chem Studies Acquisition Targets Including Umicore

(Bloomberg) -- LG Chem Ltd. is scouting for overseas acquisitions to expand its battery materials business, people familiar with the matter said.

The South Korean chemicals giant has been studying potential targets including Belgium's Umicore SA, according to the people, who asked not to be identified because the information is private.

Shares of Umicore jumped as much as 17% on Wednesday in Brussels, the biggest intraday gain since 1999. They closed up 10% at 41.78 euros each, giving the company a market value of about 10.3 billion euros ($10.9 billion). The stock is still trading well below its all-time high of 60.08 euros in August.

LG Chem is still in the early stages of evaluating possible deals, and there's no certainty it will pursue a transaction with any of the targets, the people said. The South Korean company hasn't yet made a formal approach to Umicore, and any takeover would likely require a suitor to offer a significant premium as well as commit to billions of dollars in capital expenditures, the people said.

A representative for LG Chem said the company can't comment on “unfounded rumors.” A spokesperson for Umicore also declined to comment.

Dealmaking in the space has been heating up. In April, Standard Industries Inc.'s investment arm revealed it had built a stake in Johnson Matthey Plc, a British company that makes catalyst-coated membranes and membrane electrode assemblies used in fuel cells.

Supply Deals

South Korean companies have been rushing to announce massive spending plans to reduce their carbon footprint and foster sustainable growth. LG Chem is in the midst of a 10 trillion-won ($7.9 billion) investment program focused on expanding its production lines of battery materials, including cathodes and separators, to support booming demand for electric vehicles.

Umicore has specialized in cathode materials like nickel and cobalt since the late 1990s, according to its website. Groupe Bruxelles Lambert SA, the investment firm built by the late Belgian billionaire Albert Frere, is Umicore's biggest shareholder with a 16% stake, data compiled by Bloomberg show.

In recent weeks, Umicore signed a long-term agreement with a battery venture backed by Mercedes-Benz Group AG to supply cathode materials to plants in Europe. The company struck a similar deal with German car giant Volkswagen AG in late 2021. Prior to the pandemic, Umicore entered into a multi-year agreement to supply LG Chem facilities in Poland, South Korea and China.

LG Chem listed its battery manufacturing arm, LG Energy Solution, in a January initial public offering that raised $10.8 billion and ranks as South Korea's biggest-ever share sale, according to data compiled by Bloomberg. LG Energy has been working to expand in the U.S., where giants such as General Motors Co. are electrifying their fleets.