LG Innotek, LG Micron Merged
By Kim Yoo-chul
Staff Reporter
The combining of LG Innotek and LG Micron, approved at a shareholders' meeting Friday, is expected to create a comprehensive parts maker with annual sales of three trillion won, analysts and industry watchers say.
Under the agreement, shareholders of LG Micron will receive 0.7252187 shares of LG Innotek for each LG Micron share they own. Those who oppose the merger can ask to have their shares bought back at 48,938 won for LG Innotek shares and 36,267 won for LG Micron shares.
"The agreement is a key catalyst to go one step further into becoming a global player in the component industry," said Innotek spokesman Jung Jae-wook.
LG Electronics, the world's No. 4 handset maker and No. 3 home appliances manufacturer, owns 50 percent of LG Innotek and 52 percent of LG Micron. The merger will be finalized by the end of this year, company officials say.
In August, the companies said they were considering a merger.
LG Innotek produces mobile phone components such as liquid crystal displays and camera modules and recently jumped into the light emitting diode (LED) lighting business. Key products handled by LG Micron include printed circuit boards and display-related components.
Sour Ties With LG Display
Although LG Innotek has grabbed a chance to realize economies of scale in the component business, challenges are ahead as the company is now involved in a patent dispute in Japan and also must mend soured relations with LG Display.
In October, Japan's Nidec Corp. filed a lawsuit with the Osaka District Court against the company for alleged infringement of its patent covering small precision motors used in optical disc drives.
Nidec is now seeking a ban on sales in Japan of such products. It also filed a suit against Innotek for a separate motor-related patent infringement with a U.S. court in Texas in 2007.
"Unless LG Innotek spends more on research & development (R&D) for key and essential technologies, its growth will be limited. The company is in a crucial transition period," said an LG official, asking not to be identified.
Analysts and LG officials say LG Innotek needs to be more open-minded for "constructive" discussions with LG Display toward the rapidly-growing LED business.
LG Display has been experiencing a bumpy road in setting up an LED packaging joint venture with U.S.-based Cree in China over getting original LED-related technologies owned by the U.S. company.
"Yes, the talks are stalled without any significant breakthrough. But I don't think LG Innotek will benefit if the talks break up," a high-ranking industry source told The Korea Times.
In an ambitious way to integrate the LED business to cost cuts, LG Display discussed a similar plan with LG Innotek. But the scenario was scrapped due to the pressure of investment, profitability and unstable module supply by LG Innotek.
Not only do LED backlights provide increased battery life for notebooks, they enable much thinner displays and innovative new thinking about product design. These advantages have seen leading flat-screen makers strengthening their LED-backlight business.
"Again, LG Innotek will lose momentum in new growth engines without aggressive R&D spending and full support from LG Display," the source added.