Sat, Jul 17, 2004 - Page 11 News List

IPO shortfall not expected to disrupt LG Philips' plans

STRATEGIC EXPANSION The liquid-crystal display maker needs the funds from the public offering to build new plants and keep up with rivals like AU Optronics Corp

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LG Philips LCD Co, the world's second-largest liquid-crystal display (LCD) maker, will be able to pay for new plants even though its US$1 billion initial public offering fell short, the company and analysts said.

The Seoul-based venture between LG Electronics Inc and Royal Philips Electronics NV yesterday cut the number of shares and sold the stock at the lowest price offered to investors. LG Electronics and Philips scrapped plans to sell part of their stakes in the IPO, which is to pay for expansion plans.

LG Philips needs the funds to build new plants, which can cost more than US$2 billion each, to keep up with rivals such as Samsung Electronics Co and AU Optronics Corp (友達光電). The company has said it plans to be the leading investor in a 25 trillion won (US$21 billion) complex in South Korea.

"I don't think the lower proceeds from the IPO will disrupt funding plans for the new plants," said Tony Jung, an analyst at Good Morning Securities Co. "It can fill in the shortage with borrowings or earning reserves, as its finances are sound."

The company's profit may more than double to 2.2 trillion won this year, Jung said. It had about 1.3 trillion won of net debt at the end of last year, he said. LG Philips scaled back the IPO because of declining demand for LCD-related stocks.

AU Optronics, the world's third-largest LCD maker, raised US$480 million selling shares last month, 43 percent less than the maximum the company got permission to raise in May. LG Philips sold 8.64 million shares to South Korean investors at 34,500 won (US$30) each, raising about US$259.2 million.

The company also sold 49.92 million US depositary shares at US$15, the low end of a US$15 to US$18 price range in a July 9 Securities and Exchange Commission filing. Each ADS represents half a share.

"The proceeds from this transaction will be used to fund strategic expansion plans," LG Philips chief executive Koo Bon-joon said in a statement.

In its July 9 filing, the company said it expected net proceeds of US$1.06 billion from the sale, based on a price of US$16.50 per US depositary share, after expenses and commissions. The proceeds are to be used for the construction of the company's seventh fabrication plant in Paju, South Korea.

"We plan to fund the remainder of our expenditures for P7 [the Paju plant] using cash from operating activities," the company said in its regulatory filing.

LG Philips last week reported unaudited second-quarter net income rose fourfold to 701 billion won and sales surged 80 percent as consumers preferred flat screens to bulkier glass tubes.

LG Electronics and Philips scrapped plans to sell 10.3 million of shares in the IPO, giving up proceeds of US$154.5 million each from the sale. After the IPO, the stakes held by LG Electronics and Philips Electronics will be lowered to 44.8 percent each from 50 percent.

LG Philips shares are scheduled to start trading next Thursday on the New York Stock Exchange and next Friday on the Korea Stock Exchange.

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