Fri, Nov 24, 2006 - Page 11 News List

Analysis: Jabil's bid for Green Point may set off more mergers

TARGETS Jabil's offer will likely inspire more EMS firms to look for other potential acquisition targets to enhance their competitiveness in the handset manufacturing field

By Jason Tan  /  STAFF REPORTER

US-based Jabil Circuit Inc's bid on Wednesday to buy out Green Point Enterprises Co (綠點高新科技), Taiwan's largest handset plastic parts maker, will likely stimulate a wave of consolidation in the handset component manufacturing industry, analysts said yesterday.

Jabil Circuit Inc, the world's sixth-largest electronics manufacturing service (EMS) company, has offered NT$30 billion to buy out Green Point through Jabil Circuit Taiwan Ltd.

The deal, subject to shareholders' approval, is said to be a record-high offer from a foreign enterprise for a local electronics firm, and "signifies the value of local handset component makers to other handset manufacturers," Gary Wang (王董騏), an analyst with Mega International Investment Services (兆豐國際投顧), said yesterday.

EMS companies are expanding their product and service range in an attempt to provide total solutions. This means expanding their capabilities in offering hardware, software and integrated production, including component manufacturing, Wang said in a research note.

Local firms that possess leading-edge technologies and are able to produce high-end handset components could be a merger target of EMS firms, another research house said.

Macquarie Research Equities said the consolidation trend would likely extend to other handset component makers, pinpointing radio transceiver microphone maker Merry Electronics Co (美律實業), keypad suppliers Silitech Technology Corp (閎暉實業) and Ichia Technology Inc (毅嘉科技) as likely candidates.

Other potential targets are lens makers Largan Precision Co (大立光) and Kinko Optical Co (今國光), insert mold maker Chi Cheng Enterprise Co (及成企業), and flexible printed circuit board maker Career Technology Co (嘉聯益科技).

Indeed, EMS firms such as Hon Hai Precision Industry Co (鴻海精密), the global leader in the field, have actively pursued mergers and acquisitions (M&A) to enhance their competitiveness.

Hon Hai chairman Terry Gou (郭台銘) told shareholders in June that the company's revenues would grow at an annual rate of 30 percent in the next five years, with the momentum coming from M&As.

The electronics giant announced the same month plans to acquire Premier Image Technology Corp (普立爾), the nation's top digital camera maker, through a share swap, in a bid to beef up its camera production capability.

In May last year, Hon Hai also decided to purchase a major stake in Chi Mei Communication System (奇美通訊), a local contract handset maker.

That move was widely expected to raise the handset design capability of Foxconn International Holdings Ltd (富士康控股), a Hon Hai spinoff that is the world's largest contract handset maker.

Faced with intense competition from Foxconn and other EMS firms, Jabil acquired Emtac Technology Corp (凱宣科技), a Taiwanese wireless application provider, in May last year.

Jabil's latest bid is a tender offer for 100 percent of Green Point's outstanding shares. The tender started yesterday and will go on for 50 days.

Market watchers said Green Point would complement Jabil in sharpening its competitiveness against Foxconn and Flextronics International Ltd, the world's second-largest EMS firm.

"Jabil is still weaker than FIH [Foxconn] or Flextronics, in terms of molds, component production and system integration," Wang said, adding that the deal would widen its client base in the consumer electronics field.

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