Earlier today, the board of directors of LG Electronics (LG) approved the acquisition of automotive lighting and headlight systems provider ZKW Group, capping a deal worth more than EUR 1.1 billion (approximately $1.33 billion USD), which is LG’s largest acquisition to date. Under the terms of the transaction, LG Electronics will acquire a 70 percent stake in ZKW Group with parent company LG Corp. purchasing the remaining 30 percent.
The merger is expected to result in synergies that allow the combined companies to lead the global lighting sector in autonomous vehicle components. Headquartered in the Lower Austrian town of Wieselburg, ZKW Group is a high-tech leader in automotive lighting systems with a presence in markets throughout Europe in addition to China, Mexico and the United States.
With revenues of EUR 1.26 billion (approximately $1.53 billion USD) in 2017 and an average annual sales growth rate of more than 20 percent over the past five years, ZKW products are found in many major European premium automotive brands including Audi, BMW, Porsche and Daimler, among others. ZKW’s offerings will complement LG’s growing Vehicle Components operations, which expects the premium automotive lighting segment to expand faster than traditional auto lighting.
ZKW’s lighting business, which has focused on premium vehicle components and related accessories, will have a much greater market presence through LG’s extensive global sales network. As the industry transitions from traditional halogens to LEDs and lasers, ZKW says it is one of the first companies worldwide that produces matrix LED headlamps and laser headlights. LG and ZKW will focus on developing intelligent lighting solutions that display high-resolution information and warnings on roads collected from sensors, including autonomous driving cameras and automotive communications.
ZKW Group will continue to be managed by the current team led by CEO Oliver Schubert, who will be responsible for all operations around the world, which includes more than 9,000 employees. LG is committed to maintaining ZKW’s autonomy and workplace culture. In particular, production in Austria will remain unchanged for at least five years.
“Through this deal, LG is adding a new growth opportunity to its automotive components business, a future growth opportunity with tremendous potential,” said Jo Seong-jin, CEO of LG Electronics. “In addition to strengthening ZKW’s product development capabilities, LG’s global production experience and international business network will present unlimited opportunities for both companies in the auto market of tomorrow, which includes intelligent lighting solutions.”
LG’s Vehicle Components Co., which oversees the company’s automotive components business, recorded sales growth of 26 percent to $3.15 billion USD in 2017. The global automotive lighting market is expected to grow from $24.5 billion USD last year to $29 billion USD by 2020, with headlights contributing 70 percent of the total. Through this deal, LG says it is reinforcing its position as a leading player in automotive components and intends to expand the range of its automotive lighting business from rear lamps to related lighting products, such as headlights.
