The Carlyle-led consortium buyout offer for Advanced Semiconductor Engineering Inc (ASE, 日月光半導體), if finalized, may trigger a chain reaction among local firms aimed at circumventing the government's China-bound investment restrictions, analysts said.
Rick Hsu (徐稦成), a senior semiconductor analyst at Nomura Securities Co in Taipei, said ASE would benefit from the deal as it would be able to create more value for its shareholders through merging with Carlyle's chip affiliates and building new plants in China. Carlyle bought Freescale Semiconductor Inc in September for US$17.6 billion.
"That will open a new door for Taiwanese companies [hoping to invest more in China]," Hsu said. Local companies could follow ASE's move, if the NT$179.27 billion (US$5.46 billion)-deal closed smoothly, he added.
Listed companies in Taiwan are banned from investing over 40 percent of their net value in China. But ASE, based in Kaohsiung, may circumvent this restriction by delisting itself on the local stock market, if it becomes a foreign company in the wake of Carlyle's buyout offer.
"The limitation is a headache for Taiwanese companies, particularly in capital-intensive industries, like ASE, as they are trying to tap into the fast-growing Chinese market," said Eric Chen (
The world's largest chip packager formed a special task force on Monday to evaluate Carlyle's offer. The Washington-based private fund grouping said last Friday that it intended to buy all of ASE's outstanding common shares at NT$39 per share, following the purchase of Freescale Semiconductor Inc in September.
In an internal letter to employees on Monday, ASE chairman Jason Chang (
To break the current China-bound investment bottleneck, many Taiwanese companies were thinking about, or exploring, possible opportunities to find foreign buyers as an alternative way to get around the government's restrictions, Nomura's Hsu said.
"Companies that can generate respectable cash flow and create synergy could be on the next-wave buyout list. United Microelectronics Corp (UMC,
UMC, the world's second-largest contract chipmaker, is more attractive than their peers as some of them already traded at historical price-to-book value, he said.
UMC does not have any Chinese factories due to the government's ban on Taiwan's high-tech firms making chips using advanced technologies in China. Several of UMC's former executives are under investigation for their role in the establishment of Chinese chipmaker He Jian Technology (和艦科技).