South Korea’s leading cable maker LS Cable & System Ltd. plans to set up a holding entity devoted to the electric vehicle (EV) components business and expand production in China.
According to the investment banking sector on Thursday, LS Cable is expected to create a holding company by early next year, temporarily dubbed LS EV Solution, that will oversee the company’s EV electronic parts business.
To set up the holding entity, the Korean cable manufacturer will first establish an electric car unit called LS EV Korea and spin it off to place it and its wholly-owned Chinese subsidiary LS Cable & System Wuxi (LSCW) under LS EV Solution.
It will sell part of LS EV Solution to private equity funds at 70 billion won ($62.1 million), which would also help enhance the company’s financial soundness. KDB Capital Corp. and Paratus Investment Inc. will manage the fund.
The company in a disclosure Friday said it sold off 47 percent of its manufacturing unit in LSCW to Paratus Investment in private pre-IPO placement for 44.7 billion won. The proceeds will partly go to fund the ongoing expansion in the Wuxi plant.
The decision to set up the EV holding company comes as the global EV market has been growing at a rapid pace with the world’s major carmakers jumping in the EV race to mimic the success of Tesla and meet toughening emissions standards across the world. The company is part of the LS Group that was spun off from the Koo-family’s LG Group, which has been eagerly expanding its businesses in automotive electronics components and EV batteries.
LS Cable plans to tap its extensive experience in power and telecommunication cables to advance into the EV electronic auto parts market. A separate holding entity is likely to improve management efficiency and operation of its EV electronic parts business, industry observers said.
The company’s Chinese subsidiary LSCW is also expected to help expand its presence in the market. LSCW, established in Wuxi, Jiangsu Province in 2003, generated 8.4 billion won in operating profit on sales of 125.2 billion won last year. Its main products are cable harness modules, an essential component in electric vehicles. LSCW has an exclusive agreement to supply high-voltage wire harness modules to BDNT, a joint venture between Chinese electric carmaker BYD and Germany’s DaimlerChrysler AG. LS EV Korea also produces the high-voltage connectors that go into the wire harness modules.
LS Cable plans to continue managing LS EV Solution even after the PEF investment, according to industry sources. The PEFs will send several of their own directors to help with management.
Last year, the cable maker listed LS Cable & System Asia, a merger of the Vietnam and Myanmar entities, on the Korean main bourse to improve financing and operational efficiency, which would back the company’s plan to grow its EV parts business.
By Kang Doo-soon and Han Woo-ram
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]