Samsung Electronics Co, the world’s No. 1 television maker, agreed to buy out the stake of Sony Corp in their joint venture to make liquid-crystal displays (LCD) used in televisions amid sluggish demand.
Samsung, based in South Korea, will pay 1.08 trillion won (US$935 million) in cash for Sony’s stake in S-LCD Corp, a venture formed in 2004 to make TV panels, the company said in a regulatory filing yesterday. Sony would take a charge of about ￥66 billion (US$846 million) in the quarter that ends on Saturday after exiting the venture, the Tokyo-based company said in a separate statement.
The deal comes as Sony, the world’s No. 3 television maker, is streamlining its main television operation, which is estimated to lose ￥175 billion (US$2.2 billion) in the year to March, an eighth consecutive year of losses. Last month, Sony predicted it would post a fourth straight annual loss after the company slashed its TV sales target and the Japanese yen reached a postwar high.
“It’s a step forward for Sony,” said Shiro Mikoshiba, an analyst at Nomura Holdings Inc in Tokyo. “Canceling out the venture enables Sony to become more flexible in procuring panels. However, the company continues to face falling prices and heavy fixed costs.”
Samsung had 50 percent plus one share of their joint venture, while Sony had 50 percent minus one share, according to the statement. The two companies have also entered into an agreement for the supply and purchase of LCD panels, Samsung said in the statement.
Sony shares gained 1.6 percent to ￥1,394 at the close of trading in Tokyo yesterday, while Samsung shares fell 0.2 percent to 1.07 -million won. The deal was announced after the stock market closed for trading. The Nikkei Shimbun reported the news earlier yesterday.
The transaction and the subsequent agreement will enable Sony to secure a flexible and steady supply of LCD panels from Samsung, based on market prices, without the responsibility and cost of operating a manufacturing facility, Japan’s biggest consumer-electronics exporter said in its statement.
“Despite this one-time loss, Sony estimates that the transaction will result in substantial savings,” starting next month, Sony said in the statement.
The Japanese company lagged behind Samsung and Seoul-based LG Electronics Inc in the global TV market last year, with 12 percent of sales, according to DisplaySearch.
In the US, Samsung and Vizio, founded in 2002, had the biggest market share for flat-panel televisions, based on research from IHS iSuppli.
Sony reversed an annual profit forecast to project an annual loss of ￥90 billion, its fourth consecutive annual loss.