Summary
Corning Incorporated (GLW) filed an 8-K on October 25, 2013, detailing a significant strategic transaction with Samsung Display Co., Ltd. (SDC) related to their joint venture, Samsung Corning Precision Materials Co., Ltd. (SCP). Under the Framework Agreement, Corning will acquire SDC's interests in SCP, effectively consolidating full ownership of the LCD glass manufacturing entity. This transaction involves a complex financial structure, including the issuance of $1.9 billion in convertible preferred stock by Corning to its subsidiary, which will then be exchanged with SDC for SDC's stake in SCP. An additional $400 million in preferred stock will be issued to SDC. The agreement also includes provisions for potential future payments based on SCP's performance, non-competition clauses, and a services agreement for ongoing support. Accompanying agreements, the Shareholder Agreement and Standstill Agreement, impose certain voting and ownership restrictions on SDC and its affiliates, limiting their collective ownership of Corning's common stock to 9%. These agreements are designed to solidify Corning's control over SCP while establishing a clear framework for its relationship with SDC moving forward.
Key Highlights
- 1Corning to acquire Samsung Display's (SDC) interests in the Samsung Corning Precision Materials (SCP) joint venture, gaining full ownership of the LCD glass manufacturer.
- 2The transaction is valued at approximately $2.3 billion, comprising $1.9 billion in convertible preferred stock issued to Corning's subsidiary and then exchanged with SDC, plus an additional $400 million in preferred stock issued directly to SDC.
- 3Corning is issuing a new series of Fixed Rate Cumulative Convertible Preferred Stock, Series A, with a 4.25% annual dividend rate and conversion features into common stock under specific conditions.
- 4Potential future payments to SDC are contingent on SCP's revenue and sales volumes before 2018, capped at $665 million and $100 million, respectively.
- 5A Shareholder Agreement restricts SDC and its affiliates' ownership of Corning common stock to a maximum of 9%.
- 6A Standstill Agreement further limits actions by Samsung and its affiliates concerning Corning's capital stock and corporate governance.
- 7The transaction is subject to customary closing conditions, including regulatory approvals, and has a termination date of June 30, 2014, if not closed by then.