Japan Display to raise $518 million as search for partners drags on

By Makiko Yamazaki and Chang-Ran Kim

By Makiko Yamazaki and Chang-Ran Kim

TOKYO (Reuters) - Embattled liquid crystal display (LCD) maker Japan Display Inc <6740.T> said it would raise $518 million through a new share issue and an asset sale, in a stop-gap measure to shore up its finances as it struggles to find partners for a tie-up.

The fundraising underscores the challenges being faced by the company, which is staring at a fourth straight year of net losses amid rising competition from cut-price Chinese players and slowing growth in smartphone demand.

The firm's woes also stem from its delayed adoption of organic light-emitting diode screens that has cost the display maker orders from its key customer Apple Inc .

The U.S. tech giant, which typically accounts for over half of Japan Display's sales, opted for OLED screens in its latest high-end iPhone X and bought them from Samsung Electronics Co Ltd <005930.KS>.

"The newly raised funds will provide Japan Display with the financial flexibility it needs in the current competitive environment that requires continuous capital investment as well as research and development," the company said on Friday.

Japan Display plans to issue new shares worth 30 billion yen ($282 million) to 30 overseas funds and about 5 billion yen to Japanese LED maker Nichia Corp <5393.T>.

It will also raise 20 billion yen from its top investor - the state-backed Innovation Network Corp of Japan (INCJ) - by selling an idled plant in northwest Japan to the fund.

The money raised will be used for advanced LCD panel production, the company said in a filing to regulators.

The latest fundraising is in addition to a line of credit worth 107 billion yen that Japan Display received from its main lenders last year and 75 billion yen it got in 2016 from INCJ.

Japan Display has said it wants to start mass-producing OLED screens to better compete with its South Korean rival Samsung Electronics, and that it needs capital partnership to do so.

But partnership talks, expected to conclude by the end of March, are taking more time than expected.

Industry sources have said it generally takes more than 200 billion yen to launch a mass production line for OLED screens.

Japan Display was formed in 2012 by combining the LCD businesses of Hitachi Ltd <6501.T>, Toshiba Corp <6502.T> and Sony Corp <6758.T> in a government-brokered deal.

Shares in Japan Display fell as much as 4 percent to a six-month low earlier on Friday, before recovering slightly to trade down 1.5 percent. The Nikkei average <.N225> was up 1.4 percent.

(Reporting by Chang-Ran Kim and Makiko Yamazaki; Editing by Himani Sarkar)