Flat Denial
A rumor has suddenly started to spread that Google, the global leader in the information technology industry, will acquire a stake in LG Electronics. An LG Electronics spokesperson denied the rumor, saying, it was “just too preposterous to mention,” but nevertheless the rumor is snowballing, interlocking the recent business slump with expected synergy effects from cooperation with Google.
According to industry sources on July 22, the rumor that Google will buy 35 percent or 2.5 trillion won (US$2.15 billion) of LG Electronics through a block deal (off-hour block trading) has spread in the market. If it becomes a reality, Google will become its top shareholder, overtaking its holding company LG Corporation.
The rumor spread like wildfire, and LG Electronics immediately denied it. An LG Electronics representative said, “We have never discussed about a share purchase with Google.”
In fact, most shares in the company are owned by individual shareholders, except for its holding company and the National Pension Service. Considering this fact, a block-deal of a 35 percent stake is practically impossible.
Despite the denial of LG, the current situation is too strange to consider it just a rumor.
First of all, LG Electronics has been unable to find the momentum to improve its performance this year, watching for an opportunity to revive. Due to widening deficits in the TV sector and dwindling sales of its strategic “G4” smartphone, the company saw its second-quarter operating profits tumble almost 50 percent year-on-year.
In the meanwhile, there has also been much speculation that Google is mentioned as the key player in the acquisition of an LG Electronics’ stake. First, Google and LG Electronics have something in common – both companies consider the smart car sector to be the next growth engine.
LG Electronics has also signed a partnership agreement with Google for its premium “OLED TV” initiative, expanding cooperation into other areas. The company held an “OLED TV Digital Marketing Cooperation Proclamation Ceremony” with Google last month, and agreed to target the global market through joint marketing.
An official from the industry said, “With LG Electronics’ business slump plausibly meshing with the recently-strengthened cooperation with Google in the smart car sector, the rumor is spreading in a flash.”