Corning Incorporated announced today that it is entering into a series of strategic and financial agreements with Samsung Display Co., Ltd., intended to strengthen product and technology collaborations between the two companies. These agreements will allow Corning to extend its leadership in specialty glass and drive earnings growth. Corning expects the transactions to close in the first quarter of 2014.
The series of transactions, subject to closing conditions being met, will result in:
• Corning obtaining full ownership of Samsung Corning Precision Materials Co., Ltd. (SCP), an unconsolidated equity venture with Samsung Display that manufactures LCD glass in Korea. Samsung Display currently owns 43% of SCP.
• After redemption of their interest in SCP, Samsung Display’s investment in new convertible preferred shares of Corning with an aggregate face amount of $1.9 billion.
• Corning’s acquisition of the other shareholders’ minority interests in SCP for an expected proportional cash payment.
• Samsung Display’s additional $400 million investment in Corning by subscribing to new convertible preferred shares.
• Using Corning’s current share count, Samsung Display’s combined investment in Corning would result in approximately 7.4% ownership on an as-converted basis.
• A new long-term LCD display glass supply agreement between Corning and Samsung Display through 2023.
• A strengthening of the two companies’ technology collaborations on strategic product development and commercialization initiatives.
In addition, Corning’s board of directors has authorized an additional $2 billion of share repurchases through Dec. 31, 2015, dependent upon the transaction closing.
“We are excited to enter this new era of collaboration in our 40-year equity relationship with Samsung, one of the world leaders in consumer electronics,” Wendell P. Weeks, chairman, chief executive officer and president, said in a statement. “The agreements provide important financial and strategic benefits to both Corning and Samsung.”
“Corning and its shareholders will realize attractive financial returns as the transactions produce immediate earnings accretion through the addition of the remainder of SCP, substantial cost synergies and significant incremental free cash flow. Our new long-term supply agreement will provide Corning steady demand in the global LCD market. By leveraging SCP’s fusion-based manufacturing assets, we will further extend our leadership in advanced glass. This affords us greater flexibility in servicing customers, managing capacity, and minimizing capital spending as we expand production of Corning® Gorilla® Glass and pursue new specialty glass applications,” he added.
“We are pleased to have an opportunity to strengthen the strategic ties between our two companies,” Kinam Kim, president and chief executive officer of Samsung Display, said in a statement. “We look forward to concentrating our efforts and combining our expertise in product development with Corning’s renowned leadership in glass technologies to develop new market opportunities in consumer products and other industries.”
Corning Expects to Realize Immediate and Long-Term Financial Benefits
“Shareholders will benefit from access to $1.2 billion which represents Corning’s share of existing cash on SCP’s balance sheet, as well as the cumulative incremental free cash flow going forward, which could total $2 billion over the next four years,” Weeks said. The structure of the transaction will also immediately increase Corning’s domestic cash balances.
He added, “Synergies from integrating our worldwide fusion glass assets should approach $100 million pretax in 2015 and continue to grow thereafter. We believe that accretion to Corning’s core earnings per share, on a fully diluted basis of approximately 20% in 2014 and 2015, can be generated from the combination of profits from the soon-to-be acquired 50% of SCP; the resulting manufacturing synergies; and the impact of the additional share repurchase program. The impact of the additional share repurchase program should offset the potential dilution of shares embedded in the convertible preferred security. The transaction should add approximately $2 billion in annual sales; $350 million in incremental profit before special items; and approximately $500 million in additional cash flow to Corning.”
Corning also expects to realize increased flexibility in glass-melting capabilities, which should bring added capital savings. Furthermore, the company will re-evaluate the need for major capital expenditures for additional fusion glass manufacturing assets.
The new convertible preferred shares will have an annual 4.25% coupon and are convertible into common shares based on a price of $20 per common share. The preferred shares are not convertible for seven years, subject to certain exceptions, and contain only limited voting rights until conversion. Effective today, Corning and Samsung have entered into a standstill agreement that limits Samsung’s activities with respect to Corning’s shares and governance. Effective upon closing, a shareholder agreement between Corning and Samsung will limit Samsung’s ownership to no more than 9% of Corning’s common shares on an as-converted basis. The transaction contains a re-pricing mechanism that will account for changes in SCP’s glass prices, volume and Japanese yen to U.S. dollar exchange.
Corning has LCD glass manufacturing operations in the United States, Japan, Taiwan and China. Samsung Corning Precision Materials has LCD glass manufacturing facilities in Korea. Following completion of the transaction, the SCP organization will be integrated into Corning’s Display Technologies segment. Corning will be able to service all specialty glass customers in all regions directly, utilizing its manufacturing facilities throughout Asia. U.S. Corsam Technologies LLC, and Samsung Corning Advanced Glass LLC, both equity affiliates established between Corning and Samsung Display, will continue under their current agreements.
About Samsung Corning Precision Materials
Samsung Corning Precision Materials is a South Korea-based manufacturer of LCD glass for flat panel displays. The business was formed as an equity venture in 1995 between Corning (50% ownership), Samsung (42.6% ownership) and minority ownership of the remainder (7.4%). In 2012, SCP recorded net sales of $3.1 billion with net income of $1.4 billion. Corning includes full financial statements for SCP in its annual report.
About Samsung Display Co., Ltd.
Samsung Display Co., Ltd. is a global leader in display panel technology and products. Employing approximately 39,000 people at seven production facilities and nine sales offices worldwide, Samsung Display specializes in high-quality displays for consumer, mobile, IT and industrial usage, including those featuring OLED (organic light emitting diode) and LCD technologies. As a total solution provider, Samsung Display strives to advance the future with next-generation technologies featuring ultra-thin, energy-efficient, flexible, and transparent displays. For more information, please visit www.samsungdisplay.com.
About Corning Incorporated
Corning Incorporated (www.corning.com) is the world leader in specialty glass and ceramics. Drawing on more than 160 years of materials science and process engineering knowledge, Corning creates and makes keystone components that enable high-technology systems for consumer electronics, mobile emissions control, telecommunications and life sciences. Our products include glass substrates for LCD televisions, computer monitors and laptops; ceramic substrates and filters for mobile emission control systems; optical fiber, cable, hardware & equipment for telecommunications networks; optical biosensors for drug discovery; and other advanced optics and specialty glass solutions for a number of industries including semiconductor, aerospace, defense, astronomy, and metrology.
Source: Corning Incorporated
MacDailyNews Take: Hello, sapphire glass iOS device displays!
Sapphire glass may be used in 2014 iPhone Retina display, sources say – September 18, 2013
Vertu COO: Apple investigated sapphire crystal displays, but found them infeasible at this time – June 13, 2013
Corning’s Gorilla Glass vs. sapphire for mobile touch displays – May 28, 2013
Apple’s next iPhone screen could be made of Sapphire – May 2, 2013
LOVE the take!!
Gorilla size Samsung phones?
Investing in buggy whips
How long until Samsung copies the gorilla glass manufacturing techniques and violates Corning’s copy-write?
No, Gibbon glass would be a “somewhat” creative name
It will be S-glass
You mean Shi..yglass?
Hit the nail on the head,
I wonder just how naive are these guys? When has it worked out well for a samsung “partner”?
Almost all of their entire business model up to this point has been based on ripping off the knowledge, techniques and IP of their “manufacturing partners”
Good luck corning. You will need it. This, almost certainly, will not end well for you.
That would be copyright, not copy-write.
Apple should now buy Corning
Steve Jobs was the one who give some direction to that company, the iPhone put them in the map. Just like google, they are going to regret the day they partnership with sammy, and this is not a bad wish for them, it is jut simple statistics..
Avery one that works with apple’s enemies don’t end up very well. Even you are a friend of apple or acomplete competitor (even a cloner one) but don’t stay in the middle because you are just going to became a bullet, not the gun.
Corning has been around since 1851.
A lot of what were once American Icons, get stupid and get clobbered. Kodak, Motorola, RCA, Westinghouse, General Electric, even pre jobs return Apple. The list goes on and on.
Now we can add Corning to the list, I truly hope they survive being “samsunged” Particularly in time like these, we need companies like them.
So your point is???
I think the point was that iPhone provided a key commercial application for Gorilla Glass that brought a lot of interest and success to a product that had previously had limited use.
Also umm did you read that? They started this company in ’95 even before Steve was back at Apple.
Samsung (and Google) only do two things – copy and steal! Very disappointed that an innovative company like Corning would link up with the leeches from Korea. Of course the fact that Apple still does any business with them is also appalling. Even Sir James Dyson has learned how despicable they are!
Go to any appliance store and see how every Samsung product is virtually an exact replica of the best/coolest item in almost every product category.
have you noticed in all the recent dyson ads on t.v. that they mention they have invented and patented their vacuum cleaner technology since samsung started copying them?
– Does anyone else recall that Samsung took a minority interest in Sharp? Link: http://www.bloomberg.com/news/2013-03-06/sharp-said-to-receive-10-billion-yen-samsung-investment.html
– Think carefully about this, why would Samsung take an interest in these firms? They are taking an interest in these firms to learn more about Apple’s plans. They took stakes that are just enough to buy influence and information. Now they are in the loop when Sharp starts churning out displays at X-resolution in Y-size for an “american customer”, when Corning starts churning out glass at X-size. There is a deeper aspect to this, both of these firms (Sharp and Corning) are development partners of Apple. They help Apple produce sample/demo/prototype materials. Samsung makes Apple parts, we all know that, but more than likely Apple isn’t calling Samsung help them construct a prototype, they are only showing up at Samsung’s door saying make 5 million of this component for a product we are releasing in 3 months. Samsung has no lead time to try and beat Apple. Now they have access, now they can develop relationships at these firms, gain knowledge and information. Apple asks Corning for 1,500 samples of gorilla glass that’s 1.5 inches square? Huh, I wonder what apple plans to do with that?
You hit the nail on the head, spying on Apple, buying access.
Meh, means nothing. Just assures that Samsung continues business interests and Corning is now a bigger player. Apple, Motorola, and others will continue using Corning glass unless Apple or others use something else such as Apple’s interest in the superior Sapphire Glass.