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October 10, 2007 2:11 pm

Philips cuts stake in LCD maker

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Philips, Europe's largest consumer electronics maker, on Wednesday said it had sold a 13 per cent stake in LG Philips LCD for €1.55bn ($2.2bn), as part of its efforts to pull out of the cyclical display industry.

Philips sold 46.4m shares in LG Philips, its joint venture with South Korea’s LG Electronics, to financial institutions, taking its holding to 19.9 per cent, the company said in a statement. It will post a non-taxable profit of about €500m from the transaction in the fourth quarter.

The sale had been widely expected after the Dutch company said in July it would lower its stake to less than 20 per cent this year. LG has been struggling to find a new partner to replace Philips after a lock-up on Philips’s 32.9 per cent stake in the joint venture expired in July.

“Philips may decide to sell additional shares to the same financial institutions later today to meet additional demand, if any,'' the company said. Citigroup and Credit Suisse Group arranged the sale.

Analysts said it was a good time to sell the stake, as LG.Philips shares have surged more than 60 per cent this year amid a recovery in the LCD industry. The transaction was made a day after LG Philips reported its biggest quarterly profit in more than three years with computer screen prices rising on a supply shortage. The world’s second-largest flat panel display maker reported Won524bn ($571m) in third-quarter net profit, compared with a Won321bn loss a year ago. .

Philips is gradually selling assets to boost shareholder value and to make acquisitions in its main sectors of medical equipment and consumer electronics. It sold a majority stake in its semiconductor unit to buyout firms last year and has also sold down its stake in Taiwan Semiconductor, the world's largest customised-chip maker.

The Philips sale is expected to accelerate LG’s efforts to find a new partner as LG Philips is to make a huge investment in the next-generation flat panel manufacturing plant. On Tuesday, the LCD group’s board approved a plan to spend an additional Won2,500bn in the eighth-generation plant, which will start producing large-size panels in 2009.

LG Philips plans to triple its capital expenditure for next year to Won3,000bn from this year's Won1,000bn.

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