SEMES deal dead…again
In early December we noted that there seemed to be problems with the deal between Samsung (005930.KS) Electronics and Wonik (240810.KS), who last August had signed an MOU for $69.4m to purchase SEMES (pvt), the largest semiconductor and display equipment supplier in South Korea. This was after a deal with KCTech (281820.KS), another Korean semiconductor and display equipment supplier fell through earlier last year. At the time, the price did not seem to be finalized and questions about compensation for the 300 SEMES employees, which would have become Wonik’s burden after the sale. At the time SEMES employees were earning ~$52,600 on average, while Wonik employees earned $39,600. Also in contention were receivables from Chinese display companies, which Wonik was willing to accept as part of the updated price ($75.5m) price it seems to be willing to pay. That price increased to $82m as negotiations progressed.
Wonik issued a statement on Friday indicating that SEMES called off the talks as the potential agreement did not meet the demands of the existing employees who would have been transferred to the new owner. Given that SEMES’s main customer is Samsung Display, who has stated their intent to end LCD large panel production, the bulk of SEMES’s business, which consists of coating, etching, and stripping tools, would have to shift to other customers, other than the inkjet segment, which Samsung was to retain. Not only has Samsung (SEMES) failed to agree on terms with the two mentioned above, but another company headed by an ex-SEMES employee also hosted discussions about a purchase but to no avail.
This leaves Samsung to deal with the money-losing operations at SEMES, which would have been primarily OLED related if the deal(s) had been completed, now the costs associated with SEMES and the higher employee salary rates will continue to be absorbed by Samsung Electronics. At some point if another buyer is not found, we expect Samsung will take action on its own and rationalize the business as originally planned, which could make the SEMES employee’s decision over compensation look a bit like short-term thinking rather than taking the entire picture into consideration. For the time being, SDC is still producing large panel LCDs, but at a reduced rate, so we expect SEMES has a bit of time to find another buyer, but once SDC pulls the plug on its remaining large panel LCD production, SEMES will look even less attractive to potential buyers than it does now.
Wonik issued a statement on Friday indicating that SEMES called off the talks as the potential agreement did not meet the demands of the existing employees who would have been transferred to the new owner. Given that SEMES’s main customer is Samsung Display, who has stated their intent to end LCD large panel production, the bulk of SEMES’s business, which consists of coating, etching, and stripping tools, would have to shift to other customers, other than the inkjet segment, which Samsung was to retain. Not only has Samsung (SEMES) failed to agree on terms with the two mentioned above, but another company headed by an ex-SEMES employee also hosted discussions about a purchase but to no avail.
This leaves Samsung to deal with the money-losing operations at SEMES, which would have been primarily OLED related if the deal(s) had been completed, now the costs associated with SEMES and the higher employee salary rates will continue to be absorbed by Samsung Electronics. At some point if another buyer is not found, we expect Samsung will take action on its own and rationalize the business as originally planned, which could make the SEMES employee’s decision over compensation look a bit like short-term thinking rather than taking the entire picture into consideration. For the time being, SDC is still producing large panel LCDs, but at a reduced rate, so we expect SEMES has a bit of time to find another buyer, but once SDC pulls the plug on its remaining large panel LCD production, SEMES will look even less attractive to potential buyers than it does now.
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