Wintek inks deal to buy LCD fab from HannStar

EXPANSION： A Wintek official said the purchase should help the company expand into flat panels for GPS devices, ultra-mobile PCs and digital cameras

By Lisa Wang  /  STAFF REPORTER

Sat, Aug 11, 2007 - Page 12

Wintek Corp (勝華), the world's second-biggest maker of mobile phone screens, signed an agreement yesterday to buy a second flat-panel plant from HannStar Display Corp (瀚宇彩晶) for NT$9 billion (US$273 million) in cash to expand its capacity and product portfolio.

The deal came as the liquid-crystal-display (LCD) industry is recovering from a supply glut, about one year after Wintek bought a similar plant for NT$6.1 billion in cash and stock.

"After buying [HannStar's] production line, Wintek will be able to extend its product coverage beyond mobile phones to include panels for global positioning systems (GPS), ultra-mobile PCs and digital cameras," company spokesperson Susie Lee (李淑薏) said.

A richer product portfolio will lower operational risks, Lee said.

Under the agreement, Wintek will acquire a third-generation (3G) plant from the nation's smallest flat-panel maker HannStar, which makes LCD screens for mobile phones and digital cameras, as well as an office building.

HannStar would be able to book a NT$4.68 billion gain from selling a less cost-efficient factory. The transaction is scheduled to close on Dec. 1.

"We think this is a good way to better utilize our assets," HannStar spokesman Chou Chin-hao (周志豪) told reporters.

After the sale, HannStar will focus on making LCD computer monitors at its remaining plant and its brand business, company chairman Chiao Yu-chi (焦佑麒) said.

Chiao said HannStar would not resume construction of a sixth-generation (6G) fab anytime soon.

Eric Lin (林宜正), an LCD industry analyst with Yuanta Core Pacific Securities (元大京華證券), holds a "neutral" view on the deal.

HannStar would need to build a next-generation plant to stay competitive in the LCD market, but the company failed to say if it would do so yesterday, Lin said.

"The acquisition will help Wintek enlarge its scale, but what we care about is whether the new plant will be profitable," Lin said.

Wintek yesterday said it lost NT$358 million in the first six months of the year, as panel prices fell on slack demand, reversing net profits of NT$1.17 billion a year earlier.

But Wintek said it had broken even in June and expects operations to improve further in the third quarter as prices are stabilizing alongside the seasonal upturn and pickup in sales of new touch panels for handsets and other consumer electronics.

Deutsche Bank Securities initiated coverage of Wintek with a "buy" rating late last month, citing potential growth from increasing use of touch screens for wireless devices. It set a 12-month price target of NT$60 for Wintek.

Shares of Wintek declined 3.7 percent to NT$41.8, while shares of HannStar fell 2.9 percent to NT$9.45 yesterday.