LG Electronics Inc said on Thursday it signed a preliminary deal on a solar cell production venture with German’s Conergy, a first foray in its goal to become a global player in the solar industry.
LG Electronics said in a statement it aimed to make a joint investment into Conergy’s solar cell unit, and was planning to sign a formal deal after two to three months of negotiations and due diligence. LG also said it would acquire a 75% stake in Conergy’s solar module plant in Frankfurt (Oder), with Conergy retaining 25%. The plant is currently in the ramp-up phase.
Earlier on Thursday, South Korea’s Maeil Business Newspaper reported LG was interested in acquiring Conergy’s solar cell unit for a price tag of at least 200 billion won ($181 million). “Contributing our technology and operational expertise to the joint venture allows us to enter the industry much faster and with better valuations than would simply acquiring a standalone solar module manufacturer,” Kwan Shik Cho, head of the Solar Cell Business Team at LG Electronics, was quoted as saying in the statement.
Shares in Conergy, which have fallen 67.6% this year amid concerns over its financial health, jumped 8.64% to €8.8 on the news, outpacing the wider market’s 1.26% drop by 0956 GMT.
As early as in May, LG’s chief executive had announced the company’s intention to enter the solar energy business and said it was reviewing whether to invest on its own or acquire another firm. LG and larger home rival Samsung Electronics have consistently shunned external acquisitions in favor of organic growth. LG’s last foreign acquisition was that of US-based electronics maker Zenith in 1995. LG has already assigned specific roles to its affiliates in order to enter the solar energy business, the Maeil also reported.
Conergy is in the middle of restructuring, having found it could not generate cash fast enough to finance its ambitious growth plans, and is now scaling back non-core operations to focus on photovoltaic activities. On September 9, it said it had sold its wind turbine generator business to US private equity fund Warburg Pincus. (Reuters)