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Wednesday, October 23, 2013
Corning To Buy Samsung's Stake From LCD JV

Corning said it would buy out Samsung Display's stake in their LCD glass joint venture in a deal that could see the Samsung Electronics subsidiary take a 7.4 percent share in the Gorilla Glass maker.

Corning is entering into a series of strategic and financial agreements with Samsung Display Co., Ltd., intended to strengthen product and technology collaborations between the two companies. The U.S. company said the transaction, expected to close in the first quarter of 2014, would add about $350 million in annual profit before special items.

The series of transactions, subject to closing conditions being met, will result in:

- Corning obtaining full ownership of Samsung Corning Precision Materials Co., Ltd. (SCP), an unconsolidated equity venture with Samsung Display that manufactures LCD glass in Korea. Samsung Display currently owns 43% of SCP.

- After redemption of their interest in SCP, Samsung Display?s investment in new convertible preferred shares of Corning with an aggregate face amount of $1.9 billion.

- Corning's acquisition of the other shareholders? minority interests in SCP for an expected proportional cash payment.

- Samsung Display's additional $400 million investment in Corning by subscribing to new convertible preferred shares.

- Using Corning's current share count, Samsung Display's combined investment in Corning would result in approximately 7.4% ownership on an as-converted basis.

- A new long-term LCD display glass supply agreement between Corning and Samsung Display through 2023.

- A strengthening of the two companies? technology collaborations on strategic product development and commercialization initiatives.

In addition, Corning's board of directors has authorized an additional $2 billion of share repurchases through Dec. 31, 2015, dependent upon the transaction closing.

"We are excited to enter this new era of collaboration in our 40-year equity relationship with Samsung, one of the world leaders in consumer electronics," Wendell P. Weeks, chairman, chief executive officer and president, said. "The agreements provide important financial and strategic benefits to both Corning and Samsung."

"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. Our new long-term supply agreement will provide Corning steady demand in the global LCD market. By leveraging SCP?s fusion-based manufacturing assets, we will further extend our leadership in advanced glass. This affords us greater flexibility in servicing customers, managing capacity, and minimizing capital spending as we expand production of Corning Gorilla Glass and pursue new specialty glass applications," he added.

"We are pleased to have an opportunity to strengthen the strategic ties between our two companies," Kinam Kim, president and chief executive officer of Samsung Display, said. "We look forward to concentrating our efforts and combining our expertise in product development with Corning's renowned leadership in glass technologies to develop new market opportunities in consumer products and other industries."

Corning also expects to realize increased flexibility in glass-melting capabilities, which should bring added capital savings. Furthermore, the company will re-evaluate the need for major capital expenditures for additional fusion glass manufacturing assets.

Corning has LCD glass manufacturing operations in the United States, Japan, Taiwan and China. Samsung Corning Precision Materials has LCD glass manufacturing facilities in Korea. Following completion of the transaction, the SCP organization will be integrated into Corning's Display Technologies segment. Corning will be able to service all specialty glass customers in all regions directly, utilizing its manufacturing facilities throughout Asia. U.S. Corsam Technologies LLC, and Samsung Corning Advanced Glass LLC, both equity affiliates established between Corning and Samsung Display, will continue under their current agreements.

Corning also reported preliminary results. The company said it earned about 33 cents per share, up from 28 cents in the same quarter last year. Net sales were estimated at $2.1 billion, up from $2 billion.

Full results will be announced on October 30.

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