The Wall Street Journal recently reported that Samsung Group, through its subsidiary, reached an agreement with German OLED manufacturer Novaled on the 9th to acquire Novaled at a price of 260 million euros ($ 347 million). This move underscores Samsung Group's determination to expand next-generation display technology.
Samsung has been taking acquisitions recently and annexing many small consumer electronics technology companies. Samsung's acquisition of German OLED manufacturer Novaled will help to consolidate Samsung's next-generation display OLED technology market position. At present, OLED displays are widely used in smart phones. Due to their low energy consumption and good picture quality, OLED displays are becoming more and more popular in the TV field. According to data from market research company DisplaySearch, the OLED display market size is expected to increase from US $ 8 billion in 2012 to US $ 20 billion by 2017.
Samsung will acquire Novaled in Germany through its subsidiaries Cheil Industries and Samsung Electronics. Samsung Cheil Industries subsidiary mainly manufactures OLED display electronic materials.
Samsung Cheil Industries CEO Jong-Woo Park said, "Through the acquisition of Novaled, the company will strengthen its leading position in the electronic materials market, and at the same time we can fully integrate the R & D technology of the next generation of OLED materials for both parties." Cheil will acquire a 50% stake in Novaled, while Samsung ’s parent company will own 40% of the shares, and the remaining 10% will be acquired by Samsung ’s venture capital subsidiary.
The Wall Street Journal reported last month that Cheil was discussing acquisitions with Novaled in Germany, indicating that Samsung intends to strengthen investment in the high-growth display market. Novaled was co-founded by the Fraunhofer Institute for Applied Research Promotion in Germany and the Technical University of Dresden in 2001. It specializes in the production of OLED materials for display screens and light-emitting devices. It has about 130 employees and the main customer is Samsung.
Goldman Sachs Group Executive Director Alexander Mayer (Alexander Mayer) said that in addition to Samsung Electronics and its subsidiary Cheil, Novaled also attracted some potential buyers from the United States, Asia and German international chemical companies. Mel is an advisor to the owners of the Novaled in this transaction.
Paul Joseph, CEO of venture capital firm eCAPITAL, told the Wall Street Journal that through this acquisition, Samsung and Cheil will take the display technology to another level. eCAPITAL started investing in Novaled in 2005 and holds 20% of the shares of Novald in this transaction.
Paul-Joseph Pat said that Samsung ’s offer made Noved ’s valuation equivalent to 10 times Noval ’s 2012 revenue and 100 times pre-tax profit. The valuation of Novaled may further increase. In recent years, the annual growth rate of Novaled's revenue is about 50%.
Pat said that Novaled has huge profit margins in the next-generation OLED TV market. At present, smart phones are the largest field of OLED applications. In 2012, they occupied 71% of the market size of OLED. Analysts predicted that in 2015, TV will overtake smart phones to become the largest market for OLED applications.
At the end of July this year, Samsung Electronics said that Samsung Display ’s capital expenditure this year has reached 6.5 trillion won ($ 5.8 billion), and most of it is used to expand OLED production equipment. But Samsung did not give specific values.
Samsung Display suffered an operating loss in 2011, but due to the demand for Samsung Galaxy smartphones driving OLED displays, the company turned losses into profit in 2012.
Although Samsung still faces technical challenges in the production of large-size OLED displays, Samsung still invests heavily in OLED technology. Its purpose is to gain a greater advantage than its rivals in the Asian display field. This technology is not like LCD technology is so easy to be imitated and chased by opponents.
Robert Yi, president of Samsung Electronics Investment Relations, said in July, "We will continue to expand the technological advantages between Samsung and its competitors." He said that Samsung aims to use diversified OLED applications including curved displays to achieve another technology "cross" .
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