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US private equity company to acquire stake in Yageo through bond purchase

US private equity firm Kohlberg Kravis Roberts & Co (KKR) will take a 16 percent stake in Yageo Corp (國巨) by subscribing to the US$230 million euro convertible bond issue by the local electronics component maker next week.

The unsecured zero-coupon bonds will be convertible to Yageo shares at NT$16.15 (US$0.49) each after the bonds mature seven years later, Yageo said yesterday.

The price would represent a 11.5 percent premium to Yageo's three-day average trading price prior to the signing of the contract.

KKR's affiliates would subscribe to 99 percent of the convertible bond issue by Yageo and would take a 16.1 percent share of Yageo's issued share capital in the wake of a full conversion, Yageo said.

"Yageo aims to become a leader in the passive component industry, and we believe we can achieve that with the help of KKR, which has extensive global resources and world-class management expertise," company chief executive David Huang (黃峻樑) said.

Yageo, ranked No. 3 in the world's passive component industry, mainly produces multilayer chip capacitors used in a wide range of consumer electronic products ranging from mobile phones to liquid-crystal-display TVs.

"We hope to use our global resources and experience to help Yageo grow further," said Julian Juul Wolhardt, a senior executive at KKR's Asia division in Taipei.

Yageo may get new customers or new suppliers in the future by cooperating with some of the 150 companies that KKR had invested in over the past three decades, Wolhardt said.

KKR has about US$30 billion in funds and hopes to invest in more local firms, he said.

KKR will not participate in Yageo's board election next Wednesday, but will join the board after the private bond investment has been fully converted into common shares, Huang said.

Yageo, which plans to close the sale of corporate bonds by June 15, will use the proceeds to purchase raw materials and expand capacity in Taiwan and China, he said.

Yageo said earlier that first quarter earnings hit a record NT$517 million (US$15.66 million), up 23 percent from a year ago.

Separately, in the latest development in the fight between Yageo and Ta-I Technology Co (大毅科技) management for control of the local chip resistor maker, Ta-I's board decided to postpone the annual shareholders' meeting to elect a new board from next Wednesday to Aug. 22.

Yageo holds about 17 percent of Ta-I through a venture capital affiliate, but Tai-I claims it had gained a 45 percent share in preparation for a hostile takeover bid.
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