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Sony sells stake in LCD venture

by Renee Cordes  |  Published December 27, 2011 at 9:41 AM
SonyLCDFlat_227x128.jpgJapan's Sony Corp. agreed Monday, Dec. 26, to sell its stake in a liquid crystal display panel joint venture with South Korea's Samsung Electronics Co. for 1.08 trillion won ($938 million) in cash.

After acquiring Sony's stake in S-LCD Corp., Samsung will become a supplier of LCD panels to its former joint venture partner under a separate strategic alliance agreement. The pact also allows Sony and Samsung to continue to cooperate on engineering efforts focused on LCD panel technology, the companies said.

"For Sony, the 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," the companies said in a statement.

They added that with with whole ownership of S-LCD, Samsung anticipates "heightened flexibility, speed and efficiency in both panel production and business operations."

Tokyo-based Sony, which has invested about 1.06 trillion won in the venture since 2004, said that the transaction will result in a one-time impairment charge of about 66 billion yen ($846 million) in the quarter ending March 31, 2012.

The deal is due to close by the end of January, pending regulatory approvals.

Japan's top consumer-electronics exporter is bulking up in other areas, through acquisitions with partners, as it seeks to offset losses in the TV manufacturing business, where Samsung is the world leader.

Last month, a consortium led by Sony signed a $2.2 billion deal to buy the music publishing business of EMI Group Ltd. Rounding out the consortium are the estate of Michael Jackson, Abu Dhabi's Mubadala  Development Co. PJSC, Jynwel Capital Ltd., Blackstone Group LP's GSO Capital Partners LP and music and film producer David Geffen.

Despite the one-time loss from the sales of its S-LCD stake to Samsung, Sony estimates that the transaction will result in "substantial savings" as of Jan. 1, 2012, "in respect of costs associated with the procurement of LCD panels."

Earlier this month, Fitch Ratings downgraded Sony's long-term ratings to one level above junk status, citing concerns over the company's weakened financial performance and a belief that Sony faces an uphill battle in recapturing its former strong position in key markets.

"Fitch believes that the operating environment for Sony is likely to remain tough due to weak demand from developed markets and negative external factors such as the weakened rally of the Japanese yen, Thailand's floods, and the aftermath of the Japanese earthquake," the ratings agency said.

Sony Corp. shares fell 0.5% in Tokyo on Tuesday to trade at 1,387 yen, while Samsung shares gained 0.66% in Seoul to 1.073 million won.




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Tags: LCD | M&A | middle market | Samsung Electronics Co. | Sony Corp.

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