Philips Stake Sale Clears LG Display of Overhang
By Kim Yoo-chul
Staff Reporter
Philips Electronics NV ended its 10 years stake partnership with LG Display, Thursday, after the European consumer electronics giant sold its remaining stake in the world's second-biggest flat-screen maker.
But the "widely-expected" move is highly unlikely to blow LG's flat-screen business as the company has removed the overhang risk in the long run.
"The sell-off effect by the Dutch player will be short-lived on LG Display shares. Top considerations are an increase of flat-screen orders from Chinese TV makers and the weaker Korean currency," Park Sang-hyun, an analyst at Hi Investment wrote in a memo to clients.
Shares of LG Display fell 6.5 percent to end at 25,900 won on the nation's main bourse. Analysts said the steep decline was due to concerns over a short-term share overhang.
"Uncertainties about what Philips would do with its remaining stake have been completely cleared. Whether LG shares are to rise is dependent on the market situation," according to another local brokerage Hana Daetoo Securities.
LG spokesman Park Sang-bae said utilization rates in its flat-screen production was heading to full capacity thanks to rock bottom flat-panel prices and rising demand in China.
Early in the day, Philips sold its remaining 13.2 percent stake in LG for $800 million as part of its core business transition to less volatile healthcare-related areas from cyclical businesses.
Philips sold the stakes to investors in a capital-markets transaction and the stock was sold at a 7.4 percent discount to LG's closing share price, Tuesday.
Since 1999, Philips and LG display had maintained a mutual partnership. The tie-up was much needed for LG to increase its presence in the European TV market where Philips is a leading presence.
But the Dutch player has steadily been lowering its stake in the Korean company as its TV business stalled in the key North American market and even on its home-turf.
In October 2007, it lowered the portion to 19.9 percent from 32.9 percent, resulting in LG changing the company name to the current LG Display from LG.Philips LCD.
"Philips will remain as one of our major clients despite the stake sale," Park added.
For flat-screen panel makers, securing as many TV set makers as possible is the top concern in deciding their profits.
LG Display is better positioned than its Taiwanese rivals in terms of client base.
LG is selling its panels to Dell and Apple of the United States, while Panasonic of Japan is buying key components used in TVs from its South Korean partner.
