COPENHAGEN Bang & Olufsen has entered a strategic technology partnership with LG Electronics on the development and production of its televisions, the Danish company said on Friday, lifting its share price by 10 percent in early trading.
Though the design of Bang & Olufsen's high-end televisions are highly regarded, there has been criticism that the loss-making company's technology has failed to keep pace with that of rivals.
"Some of the problems they've had are resolved today with this partnership," said Sydbank analyst Morten Imsgard, adding that the deal will strengthen the company's hand in the face of takeover approaches and increases the likelihood of it retaining its independence.
The 90-year-old company, which has failed to make a profit in each of the past three years, said in November that it had received approaches over a potential takeover. On Friday it said that dialogue with a potential buyer is ongoing but no binding commitments have been made.
Bang & Olufsen, known for its sleek designs and televisions costing up to 60,000 Danish crowns ($8,540), said the agreement with LG presents potential annual cost savings of between 150 million crowns and 200 million crowns when fully implemented over the next three years.
The partnership will help the company to achieve technological capabilities and scale needed to improve long-term profitability, it said in a stock exchange announcement.
"The partnership will address Bang & Olufsen's key challenges," Chief Executive Tue Mantoni said in the statement.
(Reporting by Annabella Pultz Nielsen; Additional reporting by Nikolaj Skydsgaard; Editing by David Goodman)