Corning Soars 26% On Buyout Of Samsung JV, Strategic Deals

(RTTNews) - Gorilla Glass maker Corning, Inc. (GLW) agreed Tuesday to buy out Samsung Display Co., Ltd.'s 43 percent stake in a jointly owned equity company named Samsung Corning Precision Materials Co. in Korea. The move is part of a series of strategic and financial agreements with Samsung Display in order to strengthen product and technology collaborations between the two companies. Corning expects the transactions to close in the first quarter of 2014.

The LCD glass manufacturing joint venture was established in 1995 in South Korea's Gumi, North Kyungsang Province. The joint venture is 50 percent owned by Corning, 42.6 percent by Samsung, and 7.4 percent by minority shareholders.

New York-based Corning said it will acquire the minority interests from other shareholders for an estimated proportional cash payment.

After redeeming its interest in the joint venture, Samsung Display will invest $1.9 billion in new Corning convertible shares along with another $400 million investment in Corning by subscribing to new convertible preferred shares. The combined investment will give Samsung Display a 7.4 percent stake in Corning on an as-converted basis.

Corning noted that the preferred shares, which are not convertible for seven years, will have an annual 4.25 percent coupon and are convertible into common shares based on a price of $20 per common share. An agreement was also inked to limit Samsung's ownership to no more than 9 percent of Corning's common shares on an as-converted basis.

As part of several agreements, there is also a new long-term LCD display glass supply agreement between Corning and Samsung Display through 2023.

"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. Corning Chairman, President and CEO Wendell Weeks said in a statement.

The agreements will allow Corning to extend its leadership in specialty glass and drive earnings growth, with the actions expected to be immediately accretive on fully diluted basis for Corning.

Corning's board also authorized an additional $2 billion of share repurchases through December 31, 2015, subject to the closure of the deals.

After the acquisition of full ownership of Samsung Corning Precision Materials, Corning will generate nearly $100 million in pretax synergies in 2015 from the integration of its worldwide fusion glass assets and continue to increase thereafter. Corning also anticipates the deal to add about 20 percent to its core earnings per share, on a fully diluted basis, in 2014 and 2015.

"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. The structure of the transaction will also immediately increase Corning's domestic cash balances," Weeks added.

The deal is expected to add about $2 billion in annual sales, $350 million in incremental profit before special items, and about $500 million in additional cash flow to Corning.

Separately, Corning said it expects adjusted earnings for the third quarter to increase 18 percent to $0.33 per share from last year. Core sales are now anticipated to increase 10 percent year-over-yer to $2.1 billion over last year's $1.9 billion. Sales in all other segments were in line with expectations.

On average, 17 analysts polled by Thomson Reuters expect the company to report earnings of $0.32 per share, on revenues of $2.10 billion for the third quarter . Analysts' estimates typically exclude special items.

Corning said it is scheduled to report financial results for the third quarter on October 30, when it will discuss third-quarter results and fourth-quarter outlook in more detail.

GLW closed Tuesday's regular trading session at $15.35, up $0.26 or 1.72% on a volume of 23.65 million shares. The stock soared a further $3.96 or 25.80% in after-hours trading.