Arima Communications and Elcoteq suspend merger talks; to kick off joint production for LGE

Taiwan-based ODM handset maker Arima Communications and Europe-based EMS provider Elcoteq have temporarily suspended talks for a possible merger and instead the two companies will team up together for the production of low-cost handsets for LG Electronics, according to sources close to the deal.

The merger talks between the two companies have continued for three years but have hit a deadlock recently as the companies disagreed over the scale of equity acquisition, the sources indicated.

Arima had preferred to acquire part of Elcoteq's assets in order to integrate its own ODM capability with Elcoteq's EMS strength in handset production, whereas Elcoteq was more willing to sell its assets in a bundled deal, noted the sources.

Although Arima and Elcoteq have failed to finalize the acquisition talks, the two companies have agreed to join forces to produce low-cost handsets for LGE, said the sources.

Under the cooperation plan, Arima will switch its outsourcing of LGE's low-cost handsets targeting the Latin American market from Flextronics International to Elcoteq's plant in Brazil, with the production volumes likely to reach 'several' million units, the sourced added.