South Korea’s LG Electronics Inc. is titling towards breaking up its mobile communications division instead of a block deal to get the best value of its hard-invested mobile business.
According to multiple sources from the investment bank industry and electronics industry on Monday, LG Electronics has abandoned its earlier decision to sell its mobile communication division to a single buyer in a block deal and is examining a split sale of the business to multiple buyers. Businesses up for sale may include different combinations of production base, smartphone development workforce, and intellectual property.
Shares of LG Electronics fell 5.12 percent to close at 157,500 won ($142).
Last month, LG Electronics confirmed it was studying “every possibility” about its smartphone business that has lost nearly $5 billion over the last five years, with options including the sale of the whole mobile communications division to a single buyer.
The company struggled to save cost by halving the number of its employees in mobile division from 7,427 in 2015 to 3,719 in the third quarter of last year. LG Electronics’ mobile business stayed in the red last year.
Discreet negotiations also faced setback due to various speculations after LG’s phase-out plan was revealed.
Vietnam’s Vingroup was floated as the candidate for LG Electronics’ overseas smartphone production lines including one in Vietnam while Volkswagen Group was rumored for the vehicle component solutions business.
Under the new strategy, LG Electronics will likely seek to sell mobile phone production factories, intellectual property, and core workforce in different combinations to multiple buyers. For example, it may sell its overseas production lines to Vingroup, while tapping another buyer for its information technology business.
Since the division is comprised of skilled software and Android engineers, automakers too would be interested in the manpower and technology.
LG Electronics also could put together mobile communication software workforce and vehicle solution technology for appeal as infotainment business solution provider.
The split sale, however, could complicate intellectual property ownership. Some of its mobile communications IPs are used in developing LG Electronics’ mainstay home appliances, TV displays, and vehicle solutions. This may pose legal risk to both the seller and buyer as IP technology is linked to next-generation core business areas.
By Park Chang-young, Park Jae-young, and Lee Eun-joo
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]