LG launches bid for headlight producer ZKW

LG Electronics and LG Corporation, LG Group’s holding company, have joined a bid to acquire ZKW, an Austrian headlight producer, according to tech sources.

The bid for the world’s No. 1 player in headlights is estimated at $1.2 billion and the preferred bidder may be named sometime next month.

On Tuesday at the Korea Exchange’s inquiry disclosure, an LG spokesperson said, “Nothing has been confirmed so far but we will file a regulatory filing as soon as details are confirmed or within a month.”

They declined to confirm the matter but did not deny it either. LG’s bid for the European company comes as the second-largest electronics goods and smartphone producer in Korea is betting on the automotive business for long-term growth - a trend that Samsung also appears to be embracing as it acquired Harman International, an American automotive audio component behemoth, at $8 billion won last November.

LG Electronics, which has been losing its edge in the smartphone business in the past several years, launched a division wholly devoted to automobile products in July 2013 to develop and produce components such as infotainment systems, advanced driver assistant systems and vehicle engineering. It has been supplying components to GM’s Chevrolet Bolt electric vehicle since last year. Last week, the company announced it would spend $25 million to build an electric vehicle component factory in Michigan.

“LG Electronics did not deny the rumor that it is poised to acquire ZKW,” said Kim Ji-san, an analyst with Kiwoom Securities. “Should the deal be realized with LG owning an exclusive right to negotiation, LG could also jump forward in the automotive component business just as Samsung did through Harman.”

LG Electronics shares shot up 10.48 percent to end at 82,200 won ($73.2) on Wednesday.

The purchase of ZKW is set to become the largest merger and acquisition deal for LG, the fourth-largest conglomerate after Samsung, Hyundai Motor and SK in Korea.

The acquisition of ZKW will be handled jointly by LG Electronics and LG Corporation, but the former is expected to control ZKW should the deal materialize.

ZKW was in the final stages of negotiations with Panasonic for up to $1 billion and was expected to reach a basic agreement as early as last December. Investment banking insiders say Panasonic, a major battery supplier to Tesla Motors, is again challenging to acquire the Austrian company and compete against LG.

ZKW, established in Vienna in 1938 and now headquartered in Wieselburg, Austria, supplies light-emitting diode headlights and lighting modules to a number of automakers in varying sizes including GM, Ford, Mercedes-Benz and BMW.

The company, which competes against Korea’s SL Corporation and Japan’s Ichikoh, has been posting solid growth in recent years. Its revenue almost quadrupled from 280 million euros ($335 million) in 2010 to 968 million euros in 2016, when year-on-year revenue growth was 25 percent. It expects revenue to reach 1.2 billion euros this year.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]