LG Electronics shares soared more than 10 percent on Aug. 30 after a news report that the Korean tech giant plans to acquire ZKW Group, an Austria-based automotive light maker, for about 1 trillion won (US$889 million).
The share price closed at 82,300 won, up 10.62 percent from the previous trading.
In a regulatory filing on the day, LG also didn’t deny the ongoing talks, saying: “Nothing has been decided on the purchase. But we will make an official announcement when the purchase is decided within a month.”
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ZKW produces lights, electric systems and electronic modules for vehicles, including LED-based high-intensity headlights. Its key clients include Mercedes-Benz, BMW, Volkswagen, Audi and General Motors, with sales reaching about US$960 million last year.
Industry sources said the two firms have continued talks for more than a year and the talks have more recently been speeding up. Until last year, Japan's Panasonic was widely rumored to be acquiring ZKW.
“ZKW is a fast growing company,” said Kim Ji-san, an analyst at Kium Investment and Securities. “This year its sales are estimated to reach 1.2 billion euros (US$1.43 billion).”
He said ZKW is one of the top five automotive light makers that make up more than 75 percent of total global sales.
If the deal is finalized, it will become the largest-ever purchase by LG Group, which has been making a big push on automotive parts.
“With the purchase, LG Electronics' vehicle component business unit will see its sales, currently at about 3.7 trillion won, surge to some 5.3 trillion won,” Kim added.
Analysts, in particular, stressed that headlamps are key to autonomous driving as they play the role of detecting and analyzing the road condition. They expect LG affiliates such as LG Electronics and LG Innotek to benefit directly from the acquisition as they could harness their expertise in smart driving based on ZKW's intelligenet lighting technologies.
LG Innotek, the parts unit, increased 2.79 percent to close at 184,000 won.
By Lee Ji-yoon (email@example.com