TCL Group (000100.SZ) has unveiled more details about its equity acquisition of Shenzhen Huaxing Optoelectronics Technology Co., Ltd. on the evening of September 25. The company plans to acquire a 10.04% stake in China Star Optoelectronics from several shareholders, including Changjiang Hanyi, Xingyu Limited, and Lin Zhouxing, through a share issuance. The agreed-upon price for this transaction is RMB 4.034 billion.
The entire payment will be made via share issuance. Upon completion, TCL Group will directly own 85.71% of China Star Optoelectronics, while Changjiang Hanyi will receive 7.84% of TCL’s shares. The specific number of shares issued during the transaction is outlined in the attached image.
Looking ahead, TCL has expressed its intention to continue acquiring the remaining shares of China Star Optoelectronics. This move is part of a broader strategy to consolidate control over the business.
Huaxing Optoelectronics specializes in the research, development, production, and sales of semiconductor display panels. Established in November 2009 by TCL Corporation and Shenzhen Shenchao Technology, it initially had a registered capital of RMB 1 billion, with both companies holding 50% each. Over time, through multiple capital increases and equity transfers, the registered capital grew to 18.342 billion yuan, and Shenchao Technology eventually exited. TCL's ownership rose to 75.67%.
Although the company's products are primarily B2B, it remains a high-quality asset for TCL, significantly contributing to the group's performance. In 2015, China Star Optoelectronics contributed 18.038 billion yuan in revenue, making up 17.77% of TCL’s total revenue. By the first quarter of 2017, that contribution had risen to 6.54 billion yuan, or 26.30% of TCL’s total revenue.
In the first half of 2017, TCL reported sales revenue of 51.3 billion yuan, a 9.41% year-on-year increase. EBITDA reached 5.92 billion yuan, up 72.4%, and net profit attributable to listed company shareholders was 1.03 billion yuan, an increase of 70.7%. Meanwhile, China Star Optoelectronics achieved sales revenue of 13.54 billion yuan, a 49.2% year-on-year increase, and EBITDA of 5.48 billion yuan, up 149.7%.
TCL stated that completing this transaction would enhance the listed company's profitability and strengthen support for China Star Optoelectronics' operations, improving efficiency. This will also help deepen the deployment of LCD panel products and enhance the overall competitiveness of the company.
Additionally, TCL plans to allow key management and core employees of China Star Optoelectronics to hold shares through employee stockholding platforms, aiming to boost employee engagement and loyalty.
Looking forward, TCL aims to fully acquire China Star Optoelectronics. At the recent IFA Consumer Electronics Show in Germany, TCL Group Chairman Li Dongsheng highlighted that semiconductor display technology, artificial intelligence, and intelligent manufacturing upgrades will be the company’s future focus. The goal is to surpass Samsung in three to five years, with China Star Optoelectronics playing a central role.
Currently, China Star Optoelectronics is the second-largest TV LCD panel manufacturer in mainland China. According to IHS data, it held a 13% global market share in 2016, becoming a major supplier of TFT-LCD panels worldwide. Its t1 and t2 factories, which produce TV panels, have maintained full-scale sales, with growing market share. The t3 plant, focused on high-end smartphone and PC panels, has started small-scale external supply and is expected to reach mass production in Q4.
The t6 project (11th generation TFT-LCD and AMOLED production line) is set to begin operations in mid-2019, while the t4 project (6th generation LTPS-AMOLED flexible line) is expected to start in 2020. An OLED R&D test line has already been completed.
Li Dongsheng previously mentioned that the largest capital investment for TCL is in China Star Optoelectronics. Although the company initially considered spinning off the business, policy constraints in the domestic capital market prevented it. Instead, TCL opted to finance the unit through its group platform.
After this transaction, TCL will look to repurchase the remaining shares held by China Development Fund (11%) and Guangdong Finance Trust (3.28%). The ultimate goal is to form a more efficient and competitive semiconductor display industry group.
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