Samsung Gets Government Approval for Suzhou Sale

Samsung Gets Government Approval for Suzhou Sale
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As far back as July 2020, we noted that various parties were in discussion with Samsung Display concerning the purchase of their Gen 8 LCD fab in Suzhou, China.  The potential sale of the fab by SDC was part of its program to divest itself of large panel production assets, as the competition from Chinese panel producers had rendered that part of the display business for SDC unprofitable or marginal at best.  At the time TCL (000100.CH) was doing due diligence on the fab and the controlling entity, but at times other panel producers, particularly BOE (200725.CH) were also mentioned as possible suitors.  As the end of 2020 neared, it seemed that TCL, and its Chinastar (pvt) subsidiary were the winners in the Suzhou fab sale, however the end-of-year closing was delayed by South Korean government red tape, as a more detailed review of the technology to be transferred was requested and the closing was pushed into 1Q ‘21.
As of today, the South Korean government has given the sale its seal of approval, which will allow the transaction to continue, still likely before the end of 1Q, and while the profitability of the Suzhou fab has likely increased markedly over the past few months as large panel prices have increased, a deal is a deal.  The original deal structure was Chinastar would acquire a 60% stake in the holding company and a 100% stake in the fab for $1.08b US.   Of the remaining 40%, the Suchou government would retain its holdings (30% of total) and parent TCL would keep its 10%.  Samsung Display was said to be using $739m from the sale to purchase a 12% stake in Chinastar, although those parameters might have changed a bit.

- Samsung Suzhou LCD fab - Source: Samsung Display