Sumitomo is buying the UK's flagship display firm CDT for an estimated $285m. Electronics Weekly talks to CDT's CEO Dr David Fyfe.

Cambridge Display Technology was founded in 1992, developing light-emitting polymer materials and manufacturing techniques for OLED displays.

Although used in few applications than competing 'short molecule' OLED materials, the firm's technology has the distinct advantage that it can be inkjet printed over large areas whereas the competition needs vacuum processing.

And OLEDs show promise as the “Next Big Thing” in television displays.

So, why are CDT's investors selling?

Bluntly, polymer OLEDs (P-OLEDS) have taken too long to get into the market, and Sumitomo is offering $12 per share.

"The share price in the market has been hovering between $6 and $7. The last time it was anywhere near $12 was the end of 2005," Fyfe told Electronics Weekly. "The board had to take into account how many more times the company has to go to the market. It was a risk-assessment exercise."

Each time Fyfe goes out for investment, the question is always "when is it going to happen", he said.

And the answer is: there is no definite date. 'It' will happen when licensees develop their markets, said Fyfe: "The problem with new technology is that you can't stop spending. CDT is consuming $10m of cash each year and we have to bring in that money."

So far, investors have always stepped forward - CDT has bought in somewhere around $250m to date and, according to Fyfe, still has over $20m to spend - but with $12 per share dangled in front of them, investors have decided to sell.

While CDT's technology has not hit the mass market, products are already available that include its materials and know-how.

Osram is making displays up to 125mm for the medical and instrumentation markets and MicroEmissive Displays of Edinburgh is ramping up P-OLED manufacture for electronic viewfinders.

Sumitomo has not appeared out of the blue, and has played a part in CDT's development.

It has had its own P-OLED programme since 1998 and in 2001 came to CDT for a materials licence, which it followed by investing in CDT in 2002.

Sumitomo then bought Dow's P-OLED activities, and with CDT in 2005 started a joint venture called Sumation.

"Sumitomo has ambitions to be a display maker. This [the CDT buyout] is part of their strategy to become a big display maker," Fyfe told Electronics Weekly. "Sumitomo has a lot of businesses that are generating cash. With very large financial resources, if it need a couple more years of P-OLED development cash: no problem."

CDT's materials activities are in Cambridge, and in nearby Godmanchester 60 people are developing OLED display production techniques.

When the deal is complete, will R&D move to Japan?

"Sumitomo came into Cambridge a couple of weeks ago and said they want the technology end of the business to operate as usual, with things kept very much as they are," said Fyfe. "They are definitely keeping intellectual property activities in the UK. You have to remember that 30 people in Cambridge are already part of Sumation."

However, he said, some administration activities may get shifted to Sumitomo.

A dark cloud on the horizon for CDT is US OLED patents, and one European OLED patent, owned by Universal Display Corporation (UDC).

Industry insiders are split on their validity in the face of 'prior art', but they have not yet been tested in court.

"CDT and Sumitomo are strongly of the opinion that the validity of the UDC patents would be open to strong challenge," said Fyfe picking his words carefully. "UDC was awarded a European patent six months ago and it had now been opposed by Sumation, Merck and BASF."

Chemical firm Merck, a competitor to Sumitomo, also has CDT materials licences through its acquisition of Covion. Is this a problem?

"Merck is developing some of our materials and is a major competitor to Sumitomo," said Fyfe, pointing out that if these are to make it into production displays, further licences would be required.

When asked will the buy-out mean CDT paid its way, Fyfe answered in two stages: "If you ignore the premium paid by US investors in 1999, it has probably doubled the amount invested since 1992. With the US investors, it is probably a little more than the total paid since 1992."

And what of Fyfe's future? "Once the Sumitomo deal is closed, I will talk about what I do. I will be part of it." Then the CEO who flies 250,000 miles a year added: "I just want to travel a little less."

The deal in detail
Sumitomo Chemical has entered into an agreement with CDT to acquire CDT as a wholly owned subsidiary with a planned purchase price of approximately $285m.

Following the approval of the acquisition at a meeting of CDT shareholders anticipated to be held in autumn of this year, Sumitomo will pay CDT shareholders a consideration for the purchase of all outstanding shares of CDT stock and the company will become a wholly owned subsidiary of Sumitomo.

In connection with this transaction, major CDT shareholder Kelso & Company along with certain members of CDT's senior management and other shareholders holding cumulatively an approximate 43 per cent of CDT's common stock have entered into agreements to vote all their shares in favour of the transaction at their shareholders' meeting.