* Samsung Display buys $2.3 bln stake in Corning
* Corning to own all of LCD glass joint venture with Samsung
* Deal is Samsung's latest push into advanced components
* Corning shares jump 28 pct on the deal and $2 bln share
* Samsung SDI shares drop 8 pct
By Chandni Doulatramani and Miyoung Kim
Oct 23 Samsung Electronics Co Ltd
moved to tighten its grip on vital electronics parts supplies as
it looks to stay ahead of rival Apple Inc with new
products in a fast changing technology industry.
The South Korean group's unlisted Samsung Display unit could
become the biggest shareholder of Corning Inc, the maker
of scratch-resistant Gorilla Glass used in many mobile gadgets,
as part of a deal in which Corning buys Samsung Display out of a
1995 joint venture making glass for liquid crystal displays.
That deal includes a new 10-year LCD glass supply agreement
between New York-based Corning and Samsung Display, which makes
LCD panels for tablets and TVs for Apple, Sony Corp and
Lenovo Group. Corning said the deal would add about $2
billion to its annual sales.
As part of the agreement, Samsung Display will receive new
convertible preferred shares in Corning worth $1.9 billion, and
will invest another $400 million by subscribing to new
convertible preferred shares. If the preferred shares are
converted, Samsung Display would become the U.S. firm's biggest
shareholder, with a 7.4 percent stake.
The deal follows a series of bolt-on acquisitions by Samsung
Group firms in recent months as the group muscles
deeper into key supply chains and positions itself for
Corning, whose Gorilla Glass is widely used in Samsung's
Galaxy devices, Nokia's Lumia and Google
unit Motorola's Droid Razr, also produces ceramic substrates,
optical fibers and specialty glass solutions.
"By moving beyond a simple glass supply alliance, Samsung is
trying to take a longer-term view for its future product
pipelines as Corning has vast technologies not just in displays
but in other emerging areas," said Brian Park, an analyst at
"They're likely to co-develop and co-test key technologies
such as plastic panels, which are critical for making wearable
devices. Should they crack such technologies, rivals like Apple
(would need to) come to them for parts supplies."
Corning shares rose by as much as 28 percent in extended
trading on Tuesday, as investors welcomed the deeper alliance
with the world's biggest maker of smartphones and TVs. Corning
also announced a $2 billion share buyback.
Shares in Samsung Electronics, which owns 84.8 percent of
unlisted Samsung Display, slipped 0.9 percent in Seoul on
Wednesday, while Samsung SDI, which owns the rest of
Samsung Display, dropped nearly 8 percent. Some analysts said
the deal could cut investment gains booked by Samsung SDI by up
to a fifth.
"The deal gives Samsung a further leg-up in components, as
they are now partnering at a deeper level, not just low-level
joint ventures," said Soh Hyun-cheol, an analyst at Shinhan
Investment Corp. "Corning has original technology in many areas
such as glass, fibre optic, ceramics and cable. For them, a
partnership with Samsung will help reduce the risks involved in
entering into new businesses, where they have to move quickly as
growth in a maturing LCD industry is easing very sharply."
Samsung said it has no plans to exercise management control
over Corning. Founding families of Samsung Group and Corning
have had close ties for four decades, since they started a
cathode ray tube glass venture in 1973.
Samsung has long used joint ventures, many with foreign
firms such as Japan's Sanyo, as a way to master the technologies
it needed to expand into electronics. It's relationship with
Corning has grown, too, with ventures on LCD and OLED glass
manufacturing, as the display industry evolved rapidly from
bulky CRT to flat screen display. The industry is now bracing
for the next big change - OLED screens that can be curved or
bent, making them ideal for wearable devices.
The LCD glass venture competes with Nippon Electric Glass Co
Ltd and Asahi Glass Co.
Earlier this year, Samsung Electronics bought a stake in
Japan's Sharp Corp, and its units this month closed the
acquisition of German OLED raw materials firm Novaled AG.
"Samsung has made strides in improving both hardware and
software capability, but they need to do more to improve the
software side and offer really competitive products that work
seamlessly across different platforms, devices, networks and
various contents," said Park at Tongyang.
Corning said the deal, expected to close in the 2014 first
quarter, would add about $350 million in annual profit before
The company reported preliminary third-quarter results that
were in line with market estimates - earnings of about 33 cents
per share, up from 28 cents a year earlier, and net sales of
$2.1 billion, up from $2 billion. Full results will be announced
on Oct. 30.
"The impact of the additional share repurchase program
should offset the potential dilution of shares embedded in
the convertible preferred security," CEO Wendell P. Weeks said
in a statement.