Samsung’s Acquisition of Corning
Samsung Display announced on October 23 that it invested US$2.3 billion to acquire convertible preferred stocks of Corning and become the American company’s largest shareholder in seven years of time. 100% of the shares in Samsung Corning Precision Materials, the joint company with Corning, will be handed over to Corning. The decision is to deal with the current slowdown of the LCD market. Samsung Display is going to focus on future business, such as the manufacturing of OLED, down the road.
The convertible preferred stocks acquired by Samsung Display at this time will change to common stocks in seven years. Then, Samsung Display can have 7.4% of Corning’s shares on a dilution basis to become the major shareholder. However, the company is not going to directly participate in the management. The shareholding ceiling is fixed at 9.0%, too.
Corning, in the meantime, is going to acquire Samsung Display’s 43% of shares in the joint company through treasury stock purchases to become the sole owner of the company. At present, 50% of Samsung Corning Precision Materials’ shares are owned by Corning and the other 7% by Hong Seok-hyeon, chairman of the Joongang Ilbo. It was set up in 1995 and has manufactured LCD substrate glass. The chairman of the newspaper company is said to transfer all of its shares, worth approximately 300 billion won (US$284 million), to Corning as well.
The companies are planning to continue their cooperation in LCD substrate glass production through long-term supply agreements, while also seeking new business opportunities in tandem. The new contracts are expected to further enhance their 40 year-long cooperative relationship, which has mainly revolved around substrate glass manufacturing. Given that the glass substrate market is in the doldrums now, the decision can facilitate the expansion of Samsung’s OLED business to ensure its sustainable growth.
The stock transfer contract is predicted to take three to four months until the completion of the fund transaction. It becomes effective in early 2014 after the transaction is complete.