Samsung Electronics has offered to bail out beleagured PC manufacturer AST by acquiring the 51 per cent shares it does not already own for $102 million. It will also pay $307 million to cover AST?s debts.
The news follows AST reporting 1996 losses of $418 million, almost double the 1995 loss of $263 million. Revenues for 1996 were flat at $2.1 billion compared to $2.3 billion last year. Q4 revenues were $611.4 million versus $612.9 million in 1995.
AST?s massive losses have almost wiped out shareholders? 1996 equity of $12 million. During the quarter AST secured support from its banks and Samsung has guaranteed $200 million of its bank debt. AST has long-term debts of $132 million, plus short-term debts of $175 million.
The company?s board has formed a special committee, consisting of three independent director, to evaluate the Samsung proposals but said: ?There is no assurance that any transaction will ultimately occur.?
In a letter to the independent directors Samsung Electronics president and chief executive, Jong Yang Yun said: ?It is apparent that ... for AST to continue as a viable competitor in the intensely competitive PC industry, a significant further support from Samsung will be necessary. The acquisition of 100 per cent ownership would provide AST with the best reasonably available way to return to profitability. Without Samsung?s ongoing operational and financial support, AST?s ability to survive as an independent company is questionable.?
Since Samsung acquired its 49 per cent stake in AST last year it has installed a number of directors on the AST board, most recently Yong-Ro Song who is general manager of Samsung Electronic?s strategic planning office.
Bruce Stephen, PC analyst at IDC said: ?Samsung has been running AST for a while and it would make sense to take over the rest of the company if Samsung wants to be a major player in the PC market. Samsung is big in its home market of South Korea but it doesn?t have much presence elsewhere.?
He believes AST should get concentrate solely on business systems. ?The biggest challenge for Samsung is to sort out the marketing and sales strategy and to create a strong brand.?
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