LG Electronics and its holding company LG Corp. announced Thursday they had acquired a 100 percent stake in Austrian automotive light maker ZKW Group for some 1.44 trillion won ($1.33 billion), spurring its vehicle component business as a new growth engine.

According to the announcement, LG Electronics bought a 70 percent stake in ZKW Group for 1.108 trillion won, while LG Corp. purchased 30 percent of the Austrian firm’s shares at 433.2 billion won.

The acquisition plan was confirmed at a board of directors’ meeting on the day, which was finalized after about two years of negotiations.

The latest deal amounting to 1.444 trillion won in total marks the largest merger and acquisition case for LG Group in its history.

ZKW, established in 1938, produces matrix light-emitting diode headlamps, laser headlights and intelligent lighting solutions that display high-resolution information and warnings on roads for automobiles. 

It has a client list of renowned global auto companies including Porsche, BMW, Mercedes-Benz, Audi, Volkswagen, Volvo and Ford. Last year, its sales reached 1.2 billion euros ($1.46 billion).

With the acquisition of ZKW, LG Electronics is seeking to strengthen the portfolio of its vehicle component business that it has been fostering as one of the future growth engines for the tech firm.

Launched in 2013, the vehicle component business has been producing infotainment systems, solutions for electric vehicles and safety programs. It recorded sales growth of 26 percent to reach $3.15 billion in 2017. 

The global automotive lighting market is expected to grow from $24.5 billion last year to $29 billion by 2020, with headlights contributing 70 percent of the total.

“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, chief executive officer 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.”

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 include more than 9,000 employees.

Production in Austria will remain unchanged for at least five years, LG said.

Meanwhile, LG Electronics announced the company achieved 20.2 percent growth year-on-year in its first-quarter operating profit at 1.1 trillion won on a consolidated revenue of 15.12 trillion won.

Both sales and operating profit marked record highs for the quarter.

The firm’s TV business saw 577.3 billion won in operating profit, contributing the most to the quarterly profit.

Its home appliances business earned 553.1 billion won.

The smartphone unit posted 136.1 billion won in operating loss, while the vehicle component unit logged 17 billion won in operating loss.

By Song Su-hyun (song@heraldcorp.com)