NEW YORK ( The Deal) -- Corning ( GLW) on late Tuesday, Oct. 22, agreed to buy partner Samsung Display's 43% stake in their liquid crystal display venture, giving the South Korean company a direct stake in itself as competition in the smartphone and tablet market heats up.
Corning, of its namesake town in New York state, said the deal entails Samsung Display taking $1.9 billion in new convertible preferred shares in Corning after it cedes its holding in the Samsung Corning Precision Materials Co. Ltd. venture, which was launched in 1995. Corning said it would spend an additional $300 million buying out unnamed minority partners in the venture.
Samsung Display will also buy an additional $400 million worth of the new convertible Corning shares, eventually making it Corning's biggest shareholder, with about 7.4% of the company.
Samsung Display is a unit of Seoul-based Samsung Electronics.
"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," said Corning Chairman, CEO and President Wendell Weeks in a statement.
Samsung and Corning began cooperating in traditional television displays in the 1970s and Samsung now uses Corning's Gorilla Glass in many of its cellular phones and tablets. Corning said the deal would give it immediate access to the $1.2 billion in cash held by the venture and assigned to Corning.
The New York company said the deal would also allow it to shave $100 million off the annual cost of production at the venture. Corning expects its annual sales to increase by $2 billion by consolidating the venture, with profit before special items increasing by $350 million each year. That will lead to a 20% boost to its earnings per share for this year and 2015, Corning said. The company also announced a $2 billion share buyback and said it had signed a 10-year supply agreement with Samsung.
The new shares will have an annual coupon of 4.25% and can be converted into common shares based on a price of $20 per share. They can't be converted for seven years.
Samsung is the world's biggest maker of cellphones and is eager to remain not only the archrival of Apple ( AAPL)and its iPhone and iPad devices but also a key components supplier. The company in August announced an agreement for 90% of Dresden-based Novaledin a deal with an enterprise value of 260 million euros ($403 million).
Novaled is a supplier of organic light-emitting diode chemicals, which are used in the production of LED screens.
Samsung Electronics shares closed 13 won lower at W1,442,000 in Seoul Wednesday. The company has a market value of W212.4 trillion ($200.1 billion).