Royal Philips Electronics of the Netherlands and LG Electronics of South Korea have signed a Letter of Intent through which the companies will merge their respective cathode ray tube (CRT) businesses into a new joint venture company.
The transaction is expected to close in the first half of 2001 and is subject to customary regulatory approvals. Upon closure of the transaction, LG will receive an amount of $1.1 billion from the new company, to close the difference in valuation.
The 50-50 joint venture in display technology concerns all CRT activities, and key components. Both companies have agreed to include their glass activities in the final agreement, and also aim to include their Plasma technology (PDP) activities, following valuations. The new company is expected to have expected annual sales of nearly US$ 6 billion and approximately 36,000 employees.
Philips Components’ CRT business posted revenues of US$ 3.0 billion in the year 1999, and EBIT (Earnings Before Interest and Tax) of US$ 157 million.
LG has 5 CRT manufacturing sites, mainly in Asia, and employs approximately 12,000 people. LG’s CRT business had revenues of US$ 2.2 billion in 1999, and EBIT of US$ 357 million.
Under the terms of the agreement, LG and Philips will share equal control of the joint venture. The new company will be legally established in the Netherlands, with operational headquarters in Hong Kong. Philippe Combes, currently CEO of Philips Display Components will lead the joint venture.
LG.Philips LCD Co., the existing 50-50 joint venture between Philips and LG in Active Matrix Liquid Crystal Display (AMLCD), remains unaffected by the transaction.
More at www.philips.com