The plan is viewed as necessary to compete with rising global competition in the industry.  The government-backed fund, the Innovation Network Corporation, would contribute the equivalent of $2.6 billion to the deal and receive a 70% stake in the newly formed company.  The other 30% stake in the company would be divided equally between the three manufacturers.

The government of Japan, where the three companies are headquartered, encourages the leading manufacturers of the nation to increase their global presence by consolidating.  This helps the companies fight off competition from large manufacturers from other countries, like South Korea whose Samsung Electronics is larger and more profitable than any of the large electronics manufacturers in Japan.

Some in the country are not pleased with the plans for the deal as it uses public money to invest in a private company.  The electronics manufacturing industry has been volatile over the last few years and Hitachi, Sony, and Toshiba all lost money on their LCD units, although Toshiba’s unit returned to profitability last year.  The deal also comes at a time when many economic experts are recommending that governments, including the government of Japan, make reducing their public debt a high priority.

Japan Display, the newly formed company, plans to recruit managers from outside the three businesses and focus on investing in product lines.  The merger is expected to be complete in the spring, although approval must be obtained from the antitrust regulators in Japan first.  The market for small and mid-sized LCD screens is expected to top $24 billion this year.

Sony Planning To Merge LCD Units With Toshiba And Hitachi (NYSE:SNE) (PINK:TOSBF) (NYSE:HIT) is a post from: Localized USA: Your Local News Source