By Kwanwoo Jun

SK Innovation Co. shares rallied Monday after the South Korean electric-vehicle battery maker struck a $1.78 billion settlement to end a trade-secret dispute with rival LG Chem Ltd.

The stock traded 14% higher at 271,000 won in afternoon trading, paring early gains of up to 18%--the sharpest daily percentage increase since Jan. 4.

The strong rally makes sense given the immediate benefits the settlement could bring for SK Innovation, Nomura says in a note.

The settlement would enable SK Innovation "to proceed with the U.S. business rather than being mired in a legal dispute" and go ahead with building its EV battery plant in Georgia for Ford and Volkswagen cars in the U.S., the Japanese investment bank said.

SK Innovation aims to boost its Georgia factory output to 125 gigawatt-hours of battery capacity by 2025.

SK Innovation on Sunday agreed to pay a total of KRW2 trillion ($1.78 billion)--including a lump sum of KRW1 trillion and KRW1 trillion in installment payments of loyalties--to LG Energy Solution, a battery unit wholly owned by LG Chem, in return for settling the dispute over SK's alleged theft of LG's trade secrets.

Ahead of the SK-LG settlement, the U.S. International Trade Commission in February slapped SK Innovation with a 10-year ban on importing batteries and relevant materials after finding the company had destroyed evidence relating to the dispute.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com

(END) Dow Jones Newswires

04-12-21 0116ET