Samsung will acquire all of Sony's shares of the two companies' LCD panel manufacturing joint venture.
Electronics giants Sony and
Samsung have signed agreements to transition the current business relationship
with respect to LCD panels. Under the agreement, Samsung will acquire all of
Sony's shares of S-LCD Corporation, the two companies' LCD panel manufacturing
joint venture, making S-LCD a wholly owned subsidiary of Samsung.
Under the terms of the share
transfer, Samsung will pay Sony approximately $940 million. Concurrently, the two companies have entered into a new strategic
agreement for the supply and purchase of LCD panels with a goal of enhancing
the competitiveness of both companies. The companies said the agreement also
allows Sony and Samsung to continue cooperative engineering efforts focused on
LCD panel technology.
"For Sony, this transaction
will enable it to monetize its shares in S-LCD and aims to secure a flexible
and steady supply of LCD panels from Samsung, based on market prices and
without the responsibility and costs of operating a manufacturing facility," a
company statement explained. "With whole ownership of S-LCD, Samsung
anticipates heightened flexibility, speed and efficiency in both panel
production and business operations."
Established in April 2004, S-LCD
manufactures LCD panels for both its parent companies, contributing to the
expansion of the respective parties' TV businesses, and the large-sized LCD TV
market overall. However, the companies determined that LCD panel and TV market
conditions have changed since they forged the deal. In order to respond to such
challenging conditions and to strengthen their respective market
competitiveness, the two companies have agreed to shift to a new LCD panel
business alliance. The share transfer and payment are targeted to close by the
end of January 2012, subject to necessary approvals from regulatory
As a result of the
transaction, Sony expects to incur a non-cash impairment loss of approximately $845 million in the third quarter of the fiscal year ending
March 31, 2012, due to the reevaluation of its S-LCD shares. Despite this
one-time loss, Sony estimated that the transaction would result in substantial
savings on and after January 1, 2012, with respect to costs associated with its
procurement of LCD panels. The current estimate of the yearly savings with
respect to such costs is approximately $640 million, compared with LCD panel
procurement costs estimated for the fiscal year ending March 31, 2012.
Nathan Eddy is Associate Editor, Midmarket, at eWEEK.com. Before joining eWEEK.com, Nate was a writer with ChannelWeb and he served as an editor at FierceMarkets. He is a graduate of the Medill School of Journalism at Northwestern University.