To build a complete display technology ecosystem, TCL plans to acquire Samsung's Suzhou plant for 7.6 billion yuan

TCL Technology announced on Friday evening that it had "taken over" Samsung's LCD production line in Suzhou. Its holding subsidiary TCL Huaxing will acquire 60% of the shares of Suzhou Samsung Electronics Liquid Crystal Display Technology Co., Ltd. (SSL) and 100% of the shares of Suzhou Samsung Display Co., Ltd. (SSM) for US$1.08 billion...

TCL Technology announced on the evening of August 28 that its subsidiary TCL CSOT signed the Equity Transfer Agreement and Capital Increase Agreement with Samsung Display Co., Ltd. (Samsung Display) on the 28th, and the company signed the Shareholders Agreement with TCL CSOT and SSL. According to the agreement, the company will acquire 60% of the equity of Samsung Electronics Liquid Crystal Display Technology Co., Ltd. (SSL) and 100% of the equity of Suzhou Samsung Display Co., Ltd. (SSM) for US$1.08 billion (approximately RMB 7.622 billion).

Public data shows that SSL was established in May 2011 with a registered capital of US$1 billion. Its main business is liquid crystal display panel manufacturing. Samsung Display holds a 60% stake, Suzhou Industrial Park State-owned Assets Holding Development Co., Ltd. and TCL Huaxing hold 30% and 10% respectively. Financial data for the past two years show that SSL's operating income in 2019 and January-April 2020 was 8.405 billion yuan and 2.372 billion yuan respectively, and its net profit was -28.672 million yuan and 58.245 million yuan respectively.

SSM was established in 2002 with a registered capital of US$190 million. Its main business is liquid crystal display module manufacturing, and Samsung Display holds 100% of its shares. Financial data shows that in 2019 and January-April 2020, SSM's operating income was 11.623 billion yuan and 3.108 billion yuan, respectively, and its net profit was 448 million yuan and 146 million yuan, respectively.

At the same time, Samsung Display will increase its capital in TCL Huaxing with a consideration of US$739 million (approximately RMB 5.213 billion) for 60% of SSL's equity. After this capital increase, TCL Technology holds 80.28% of TCL Huaxing's equity, and Samsung Display holds 12.33% of TCL Huaxing's equity.

According to the agreement, Samsung Display shall not directly or indirectly assign, transfer or otherwise dispose of its shares in TCL Huaxing to TCL Huaxing's competitors. Within three months after Samsung Display has increased its capital in TCL Huaxing for five years, it has the right to request the company or a third party designated by the company to acquire all or part of its shares in TCL Huaxing subscribed this time.

The announcement disclosed that the core reason for this acquisition is that since the end of 2017, due to the concentrated opening of production capacity and the fluctuations in the current semiconductor display industry cycle, the entire industry has encountered a "dark moment": that is, prices are sluggish, operating efficiency is hovering at the bottom, the demand side is growing steadily, and supply-side integration has been accumulating for a long time. Therefore, this acquisition is also regarded by TCL Technology as a "new starting point" for industry reconstruction and integration, which may help improve the supply and demand relationship of the entire industry and increase the concentration of the industry.

It is worth mentioning that after this acquisition, TCL Huaxing will have three fully operational 8.5-generation lines, one fully operational 11-generation line, and one 11-generation line under construction in the large-size market, and its production capacity and market share will continue to grow rapidly. On this basis, TCL Huaxing can further optimize its product organization, give full play to the efficiency of each production line, scale production, and improve cost competitiveness.

TCL Technology stated that this acquisition will bring about five favorable changes: First, after this acquisition, the company can fully utilize the synergy efficiency of various production lines and improve cost competitiveness on the basis of continuing to maintain rapid growth in production capacity and market share; second, TCL Huaxing will give full play to its industry-leading management and control advantages, realize large-scale procurement and scale to improve the flexibility of supply chain control and enhance its comprehensive competitive advantage; third, Samsung Display will become the second largest shareholder of TCL Huaxing. Samsung has always been an important customer of TCL Huaxing. After this acquisition, the two parties will carry out closer strategic cooperation; fourth, after completing the transcendence in the TFT-LCD field, TCL Huaxing will actively carry out the layout and research and development of next-generation display technologies such as Mini-LED, Micro-LED, and flexible printed display OLED, and establish a global leading advantage in the field of next-generation display technology based on a complete ecological layout.