Analysts expect the new holding firm, to be headed by Koo Bon-joon, a son of LG's founder, will eventually be separated from LG Corp.
LG Corp is led by Koo Bon-joon's nephew Koo Kwang-mo, who took over as LG Group chairman in 2018 after his father died.
Around the turn of the century, LG Group and other South Korean conglomerates broke up into several companies led by children of the groups' founders. Now the conglomerates are passing to the grandchildren of those founders, leading to a further round of restructuring deals.
"There are cases like LG that settle this quietly, but in many conglomerates, this has led to feuds," said Chung Sun-sup, chief executive of corporate research firm Chaebul.com.
LG Corp, the holding company of South Korea's fourth-largest conglomerate, said the spinoff would allow it to focus on existing core businesses such as electronics, chemicals and telecommunications services.
LG's affiliates make batteries and displays used in General Motors, Tesla and Apple products.
Affiliates that will be spun off in May 2021 include trading company LG International Corp, LG Hausys Ltd, maker of interior parts for housing and automobiles, display chip maker Silicon Works Co Ltd and unlisted chemical manufacturer LG MMA Corp, a regulatory filing said.
The existing LG holding firm will have assets of 9.8 trillion won ($8.85 billion), while the proposed new holding firm will have assets of 900 billion won, according to an LG Corp presentation. The latter is expected to be listed on the country's stock market in late May 2021.
($1 = 1,106.9300 won)
(Reporting by Joyce Lee and Hyunjoo Jin; Editing by Ana Nicolaci da Costa and Mark Potter)
By Joyce Lee and Hyunjoo Jin
