LG Electronics to Sell 1.06 Trillion Won of New Shares; Shares Plunge

By Jun Yang - Nov 3, 2011 4:49 PM GMT+0700

LG Electronics Inc. (066570), reeling from losses at its flat-panel and mobile-phone units, plans to raise 1.06 trillion won ($938 million) in a rights offer to ramp up investment in its handset and other main businesses.

The world’s third-largest maker of mobile phones plans to sell 19 million new shares at 55,900 won apiece, a discount to today’s closing price of 61,600 won, the Seoul-based company said in a statement today. The shares first will be offered to existing holders from Dec. 20 to Dec. 21, and any unsubscribed portion will be sold in a public offering.

The world’s third-largest mobile-phone maker slumped the most in more than three years in Seoul on speculation about the share sale, the first since the company raised 636 billion won in a 2005 offer, according to data compiled by Bloomberg. LG, whose handset unit has lost money for six straight quarters, is introducing new smartphones after losing market share to Apple Inc. (AAPL) and Samsung Electronics Co.

The company tumbled 14 percent at the close of Seoul trading, its biggest daily drop since Oct. 24, 2008.

Affiliates LG Corp. (003550) fell 9.9 percent; LG Innotek Co., a light-emitting diode maker, lost 4.5 percent; and LG Display Co., the world’s second-largest liquid-crystal-display maker, plunged 6.3 percent.

Fitch Ratings on Nov. 1 lowered the outlook on LG Electronics to “negative” from “stable,” saying the company’s operational competitiveness is unlikely to recover in the short term.

Last month, Moody’s cut the outlook for LG’s Baa2 issuer and senior unsecured debt rating to “negative” from “stable.” Standard & Poor’s lowered the long-term corporate credit and senior unsecured debt ratings to BBB- from BBB.

The share-sale plan was previously reported by Dow Jones and appeared on the Wall Street Journal’s website.

To contact the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net;

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net.