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Chi Mei signs deal for 7.68 percent of TPV Technology

Chi Mei Optoelectronics Corp (奇美電子), the nation's second-biggest maker of liquid-crystal-display (LCD) panels, yesterday said it had signed a memorandum of understanding with TPV Technology Ltd (冠捷科技) to buy a cash stake in the world's biggest computer monitor maker.

Based on the initial agreement, Chi Mei said it would buy 150.5 million new TPV shares, or a 7.68 percent stake in the Hong Kong-listed PC monitor maker for NT$3.43 billion (US$1.08 billion).

Chi Mei's offer of HK$5.39 for each TPV share represents a premium of about 7 percent compared to the TPV closing price of HK$5 on Tuesday.

Shares of Chi Mei jumped 5.37 percent to NT$38.25 on the Taiwan Stock Exchange yesterday after the Chinese-language Apple Daily first disclosed the alliance earlier in the day.

Shares of rival AU Optronics Corp (友達光電) rose 3.81 percent to NT$57.2, while Chunghwa Picture Tubes Ltd (中華映管) rose limit-up at NT$9.16.

"The millions of units of PC monitors and LCD TVs TPV ships a year will provide a stable and enlarged outlet for our expanding capacity," Chi Mei chairman Liao Chin-siang (廖錦祥) said in a joint statement.

Furthermore, Chi Mei and TPV will jointly explore and assess the feasibility of further cooperation in various areas such as computer monitor manufacturing, according to the statement.

"With their support, TPV will have more certainty in panel supply and can stay focused on its core expertise of system integration and mass production," TPV chairman Jason Hsuan (宣建生) said in the statement.

Eric Lin (林宜正), a flat-panel analyst with Yuanta Core Pacific Securities (元大京華證券), said "the alliance will have a positive impact on Chi Mei and the price is quite reasonable."

"It is very natural for Chi Mei to seek integration in the LCD chain as its local peers AU Optronics and Chunghwa Picture Tubes did," Lin said.

Taking AU Optronics as an example, Lin pointed out that it supplies computer and TV flat panels to local electronics maker Qisda Corp (佳世達), previously known as BenQ Corp (明基), in a strategic alliance via cross holdings.

Improvement in gross margin or cost savings would be long-term, Lin said.

It is possible that TPV wil buy more flat panels from Chi Mei next year and could cut orders placed with AU Optronics, he said.
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