LG Electronics has begun a tender offer process that could raise its equity in Alfonso to 100%. Alfonso is operated by Zenith, a wholly owned subsidiary of LG Electronics' U.S. unit, which holds 65.4% equity, and runs the connected TV (CTV) advertising platform "LG Ad Solutions." It posted more than 900 billion won in revenue last year, emerging as a core affiliate. Since joining in 2020, it has played a central role in improving the profitability of the LG smart TV platform webOS-based business, but disputes have continued, including the founding team filing a damages suit against LG Electronics.
According to a compilation of reporting by ChosunBiz on the 2nd, LG Electronics on Mar. 31 initiated a tender offer via Zenith to secure additional equity in Alfonso. It is understood to be working on setting the purchase price per share. Once the price is set, existing shareholders will decide within 20 business days whether to participate in the tender offer. Through this tender offer, LG Electronics can acquire all of the noncontrolling equity (34.6%) held by Alfonso employees. However, because the equity sale is not mandatory, the actual change in control is expected to be decided on the final settlement deadline of Aug. 15.
Through Zenith, LG Electronics invested about $80 million (about 87 billion won at the time) in Alfonso in Dec. 2020 and secured 56.4% equity. This tender offer is being carried out under a shareholders' agreement signed during the initial investment. It includes a clause requiring Zenith, if existing Alfonso shareholders wish, to purchase their equity three times in total at the end of March each year starting in 2024. The sell limits rise in order of 33% (year 1) → 66% (year 2) → 100% (year 3) of the shares held. With the year 1 tender offer completed, Zenith acquired an additional 1,315,626 Alfonso shares at $87.975 per share, raising its equity stake to 65.4%.
The shareholders' agreement also stipulates the procedure for determining the purchase price per share. The price is set at the higher of the amount calculated to reflect the company's value at the time of acquisition and the fair price set by a board resolution. If the board fails to set a fair price, accounting firms appointed respectively by a director from the existing Alfonso shareholders' side and a director from Zenith's side each calculate a price. If the two prices differ by 10% or less, the average becomes the final purchase price. If they differ by more than 10%, a different accounting firm conducts a new valuation. That yields three fair prices in total; the two closest are selected, and their average is used as the final purchase price.
The market largely expected LG Electronics would be unable to proceed with this third tender offer, because the agreement would terminate if Alfonso conducted an initial public offering (IPO). Alfonso founder Ashish Chordia held a press briefing in Korea in Aug. last year and said he would complete a U.S. listing in the second half of 2025. A month after the briefing, the company confidentially submitted an S-1 registration statement to the U.S. Securities and Exchange Commission (SEC), kicking off the IPO process in earnest. But as the IPO progressed slowly, the final tender offer date arrived, and LG Electronics moved to secure additional equity as agreed.
◇ Will it end or inflame the infighting… the key is price
The fact that Alfonso's founding team has filed various lawsuits against LG Electronics, causing internal strife, is seen as a variable in this tender offer.
Alfonso's co-founders filed suit in the Delaware Court of Chancery about two years after the acquisition, claiming that LG Electronics sought to strip their right to nominate directors through dismissals. In Mar. last year, the Delaware Supreme Court ruled that LG Electronics' attempt to remove Alfonso's founders from the board was invalid. In addition, the founders have continued follow-on suits, claiming LG Electronics delayed the IPO or distorted the valuation of the stock.
If LG Electronics achieves full integration of Alfonso through this tender offer, these disputes would be resolved structurally. Faster decision-making and revenue distribution could also be expected, making it advantageous for LG Electronics to secure as much equity as possible through this tender offer.
The issue is price. An industry source familiar with the matter said, "The prevailing view is that Alfonso's founders filed various lawsuits against LG Electronics with the intention of exiting on better terms," adding, "How the per-share price of this final tender offer is determined will affect whether the disputes continue."
Founded in 2012 in Mountain View, California, as an advertising and content data analytics firm, Alfonso achieved full-fledged growth after joining LG Group. That was because it could expand its business based on the ecosystem of more than 200 million LG smart TVs equipped with LG Electronics' webOS. Their LG Ad Solutions, which they operate, can collect and analyze viewers' content consumption patterns in real time based on automatic content recognition (ACR) technology, enabling "targeted advertising." Its main customers are advertisers seeking to place ads through LG smart TVs. Rivals include Samsung Ads and Roku. Alfonso's revenue last year came to 934 billion won, up 19.4% from the previous year (782 billion won). Net profit for the period was 147.1 billion won, a slight decrease from the previous year (147.4 billion won).
A representative of LG Electronics said, "As a second-tier subsidiary, Alfonso has begun the year 3 tender offer process under the shareholders' agreement," adding, "We will continue to respect shareholders' rights and provide support where needed."