The world's leading contract chipmaker, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電),yesterday said major shareholder Royal Philips Electronics NV had agreed to gradually sell TSMC shares currently valued at US$8.5 billion by 2010 as part of the Amsterdam-based company's efforts to exit the semiconductor industry.
Philips holds a 16.2 percent stake in TSMC. The Dutch company's representatives on TSMC's board yesterday resigned to facilitate the share sale, according to a joint statement released by both companies yesterday.
"For Philips, selling our stake in TSMC is a logical consequence of our decision to exit the semiconductor business," Philips chief financial officer Pierre-Jean Sivignon said in the statement.
Philips took its first step in exiting the sector last year when it sold a majority stake in a semiconductor unit now called NXP Semiconductors.
Philips yesterday submitted an application to the Taiwan Stock Exchange Corp to sell US$1.75 billion worth of TSMC shares to local long-term investors.
Philips also announced a plan to offer another US$2.5 billion worth of common shares in TSMC for sale in the US by the end of this year in the form of American Depository Receipts (ADR). Every ADR will represent five common shares.
TSMC will also help Philips offload its holding and said it planned to buy back US$1.5 billion worth of Philips' TSMC shares via a tender offer. It then plans to cancel the repurchased shares, subject to board approval, which represent approximately 3 percent of the total 25.83 billion shares in the company.
"We are pleased to have come to a satisfactory solution to facilitate the exit of Philips' holding of TSMC shares. We intend to make good use of our cash while reiterating our commitment to maintain our current annual cash dividend per share," said TSMC financial executive Lora Ho (何麗梅).
TSMC said it also planned to repurchase US$27.5 billion worth of further shares from Philips between next year and 2010 and to cancel these as well.
During the three year period, Philips said it would consider selling shares to interested long-term investors.
"This long-term plan to sell TSMC shares via buybacks and through the issue of ADRs will have a minimal impact on the TSMC share price," said Bill Lan (藍新仁), a fund manager at Allianz Global Investors Taiwan Ltd (德盛安聯).
Shares of TSMC rose 0.91 percent to NT$66.5 yesterday.
Lan believed Philips' withdrawal would not have a serious impact on the operations of TSMC.
"Investors care more about the fundamentals rather than any change in the company's shareholding," Lan said.
Lan expected TSMC's orders and revenues to recover early next month, with indicators showing the early signs of rising shipments recently.
TSMC yesterday reported lower sales for last month, at NT$20.58 billion (US$624 million) on an unconsolidated basis, down 14.3 percent year-on-year, or a 1.3 percent drop month on month.