LG Electronics Inc plans to spin off some of its electric vehicle (EV) components business into a new joint venture with Canada’s Magna International Inc.
Magna would buy a 49 percent stake in the new unit for 501.6 billion won (US$453 million), while the remainder would be owned by LG Electronics, the South Korean company said in an exchange filing yesterday.
The joint venture would make e-motors, inverters and electric-drive systems in factories in Incheon, South Korea, and Nanjing, China, people familiar with the matter said earlier in the day.
Shares in LG Electronics soared by the 30 percent daily limit, their biggest gain on record.
The company’s largest shareholder, LG Corp, advanced 10 percent, the most since March.
LG Electronics is “known as a leader in electronics parts and may produce electric cars based on an original equipment manufacturer model, rather than establishing its own EV brand,” Macquarie Investment Management Korea Co Ltd chief investment officer for equities Jeon Kyung-dae said.
The new company, tentatively called LG Magna e-Powertrain, would service orders from Magna as well as Magna’s clients. EV components being poured into the joint venture include LG Electronics’ battery heater unit as well as its power relay assembly division.
“The market for e-motors, inverters and electric-drive systems is expected to have significant growth between now and 2030, and the JV [joint venture] will target this fast-growing global market with a world-class portfolio,” the companies said in a joint media release.
“LG will help accelerate Magna’s time to market and scale of manufacturing for electrification components, while software and systems integration are competencies that Magna brings to this venture,” they said.
The tie-up is LG Electronics’ second major investment in the auto industry after it bought headlight-systems and automotive-lighting provider ZKW Group GmbH in 2018 for about 1.1 billion euros (US$1.34 billion).
Under the terms of that deal, LG Electronics acquired a 70 percent stake in ZKW Group, with parent LG Corp purchasing the remaining 30 percent.
Another LG group company, LG Chem Ltd, spun off its energy storage and EV battery business to form LG Energy Solution Co on Dec. 1.
The latest venture would also have a software research and development center in Troy, Michigan, where Magna’s US headquarters are located, one of the people familiar with the matter said.
LG Magna e-Powertrain would include more than 1,000 employees at LG locations in the US, China and South Korea, and the transaction is expected to close in July, subject to a number of conditions including obtaining LG shareholder approval.
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