LG Display and Bang & Olugfsen have entered into a strategic partnership to develop and produce an OLED TV, which will be launched in 2017.
Through the agreement, B&O will achieve the technological capabilities and scale needed to improve its long-term profitability. The company will focus on its core competencies of acoustics and design, while LG covers other areas. The partnership also involved collaboration in other areas, such as licence and product bundle activities.
B&O expects to be able to improve its gross margins and lower capacity costs with the deal. Annual savings potential has been calculated at DKK150 million – DKK200 million ($22.7 million – $30.2 million), when fully implemented over the next three years. It is ‘an important step’ towards achieving B&O’s financial targets of an EBIT-margin of approximately 7% and a positive free cash flow.
As a result of the partnership, B&O expects to realise restructuring costs of between DKK10 million and DKK15 million ($1.5 million – $2.3 million). Up to DKK5 million ($750,000) of this will be realised in the company’s fourth financial quarter.
In addition to the news of an LG partnership, B&O has said that a dialogue is ‘ongoing’ with one potential offerer that may or may not lead to a a whole or part acquisition of the company’s issued share capital. At present, B&O has not entered into any binding commitments.
Analyst Comment
I have been saying for a long time that I see OLED as “the Trinitron of the FPD TV world” – with a premium share and reputation. In that light, it’s not surprising to see B&O adopt the technology. It looks as though the deal means an end to TV-making directly at B&O, no real surprise as they were the “last man standing” in European TV after the demise of Loewe and Metz. (BR)
