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 for early next year, to use the firm as a springboard for 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 of 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 sometime between 2025 and 2027 after investigating multiple candidates.
LG CNS is projected to spend more than 330 billion won on a future M&A, leveraging the experience of LG Group companies at using company funds for previous M&As.
In 2018, LG Corp. and LG Electronics Inc. acquired Austria-based ZKW for 1.44 trillion won with company funds without taking out any loans.
IPO IN FEBRUARY 2025
In October, LG CNS submitted a preliminary review for its listing on Korea’s main Kospi bourse and got the green light for the IPO early this month.
It plans book-building sessions and public subscription in January 2025 before going 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 serving 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.
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On account of the unfavorable IPO market conditions, some local companies have either 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, a 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.
