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Intel to invest US$65m in Powertech Inc bonds

Intel Corp, the world's largest chip maker, will invest US$65 million in Taiwan's Powertech Technology Inc (力成科技), its largest investment in an Asian company, to boost its flash memory business.

Intel will make the investment through a purchase of bonds issued by Powertech, a memory-chip packaging and testing company.

The bonds will be bought by Intel's venture capital arm, Intel Capital, the companies said yesterday in a press release sent by e-mail.

The acquisition is aimed at expanding Santa Clara, California-based Intel's NAND flash memory business, giving it access to components and the supply chain, Intel Capital's Singapore-based spokesman Nick Jacobs said.

NAND flash is used to store data such as music and photos in MP3 players, digital cameras and other consumer electronics.

GROWTH OUTLOOK

"We're pretty comfortable with the growth prospects for flash memory," Cadol Cheung (張仲), Asia-Pacific general manager for Intel Capital, said in a conference call.

Cheung declined to provide forecasts.

Shares of Hsinchu-based Powertech rose 3.6 percent to close at NT$142.50 (US$4.33) in Taipei, reversing an earlier decline of 3.3 percent.

The benchmark TAIEX index plunged 2.8 percent.

Intel will purchase NT$2.11 billion of a total NT$3.5 billion in convertible bonds issued by Powertech that can be converted into shares, according to a separate Powertech statement to the stock exchange.

The convertible bonds sold by Powertech would account for 6.65 percent of the company's equity if converted to shares, according to the statement.

Intel's stake would be 4.01 percent of Powertech's shares if converted into common stock, according to Bloomberg's calculations.

Intel Capital had invested a total of more than US$100 million in Taiwan before the agreement, Cheung said, without providing details.

Cheung said that the purchase of a stake in Powertech was the US company's first investment in an Asian chip-packaging and testing company.

On Feb. 15, Powertech said it had priced bonds that can be convertible into shares at a value equal to 82 percent of the stock's average closing price on the previous five days.

STRATEGIC PARTNERS

Powertech said on Monday that it wants to use the fund-raising as a means to join strategic partners to expand its business and receive new orders.

The five-year bonds cannot be converted to shares for the first three years, a step taken to avoid share dilution, said Lee Ping-chung(李萍鐘), Powertech's director of accounting and finance, in an interview on Monday.

The company expected to receive additional funds from other investors to continue expansion, Powertech said in the statement, without providing details.
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