LG CNS Co., the information technology service unit of South Korea’s LG Group, plans to acquire a foreign IT company with the proceeds from its initial public offering planned early next year to use the firm as a springboard to its global expansion.
According to its IPO prospectus filed late last week, LG CNS hopes to raise 515 billion won ($359.4 million) from the sale of nearly 9.7 million new shares, 50% of its total IPO share sales, based on the bottom band of its IPO price range between 53,700 won and 61,900 won.
The company’s market capitalization is estimated at more than 6 trillion won, garnering market interest as next year’s blockbuster IPO.
Of the total new share sales, 330 billion won will be used by LG CNS to buy a foreign IT service company, according to the prospectus.
“The company will acquire a local IT service company in an overseas market to expand its footing in the global market,” the company wrote in the prospectus. “We are thoroughly reviewing potential candidates to determine the group of target companies.”
The Korean IT service firm plans to buy a foreign IT firm from 2025 to 2027 after investigating multiple candidates.
LG CNS is projected to spend more than 330 billion won on a future M&A considering LG Group companies have used company funds for previous M&As in general.
In 2018, LG Corp. and LG Electronics Inc. acquired Austria-based ZKW for 1.44 trillion won with company funds without taking any loan.
IPO IN FEBRUARY 2025
LG CNS submitted a preliminary review for its listing on Korea’s main Kospi bourse in October and got the green light for the IPO early this month.
It plans book-building sessions and public subscription in January 2025 to go public in early February.
KB Securities Co., Bank of America (BoA) and Morgan Stanley are the lead underwriters, with Mirae Asset Securities Co., Daishin Securities Co., Shinhan Securities Co. and J.P. Morgan working as co-managers.
In 2023, LG CNS raked in 373.2 billion won in operating profit on a separate basis on sales of 5.1 trillion won.
Because of the unfavorable IPO market conditions, some local companies have scrapped or postponed their upcoming IPO plans.
LG CNS, however, will go ahead with its listing to complete it in a second IPO attempt by applying a moderate valuation multiple, the price-to-earnings ratio of 22.6 times, based on the valuation of its peers such as Samsung SDS Co. and Japan’s NTT Data Group.
LG CNS prepared to go public in 2022 but gave up its bid as IPO sentiment soured in the aftermath of the COVID-19 pandemic.
The upcoming IPO would allow Macquarie Group’s private equity arm to exit from its investment in LG CNS.
Macquarie acquired a 35% stake in the Korean IT service company from LG’s holding company LG Corp. for 950 billion won in 2019 to become the second-largest stakeholder.
Macquarie will sell its 32% stake during the IPO while keeping the remaining for six months after the listing, according to a lock-up agreement.
By Ik-Hwan Kim
lovepen@hankyung.com
Sookyung Seo edited this article.
