Dutch consumer electronics giant Philips will take a 50 per cent share in the LCD business of LG Electronics for $1.6 billion.
The letter of intent signed by both companies last week represented the largest foreign investment made into a South Korean company and saw Philips become a key player in the flat-panel display market. The consumer giant views LCDs as the fastest growing area of display technologies.
Strong sales in the LCD sector were responsible for a three per cent rise in its components division's sales in the first quarter of 1999.
The LCD division of LG generated sales of $500 million in 1998 and is expected to make $1.8 billion this year.
Philips holds a strong position in the CRT market but believes that LCDs are the way forward for monitors and other flat-panel displays. Through the deal with LG Electronics, Philips is aiming to have products available for the third quarter.
Gerard Kleisterlee, chairman and chief executive of Philips Components, said: 'The deal represents a significant step for Philips Flat Display Systems and the digital strategy of our product division and we look forward to working with LG. Through the deal, we will build on our leadership in CRTs, creating the foundations for continued leadership in the future of displays.'
The LCD division of LG has $1 billion worth of debt and is valued at $4.2 billion. The group has been looking for foreign investment to help out in many of its key divisions while selling or closing non-core businesses as part of its select and focus strategy.
Bon Moo Koo, chairman of LG, said: 'We have been pursuing a growth strategy through forming strategic alliances with leading global companies. Through foreign investments, LG not only seeks to improve its financial structure but also its global competitiveness by forming strategic partnerships.'
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