Yageo Corp’s (國巨) board of directors yesterday said a NT$46.78 billion (US$1.6 billion) acquisition bid offered by US private equity fund KKR & Co and the company’s chief executive officer Pierre Chen (陳泰銘) was reasonable, paving the way for the country’s top passive component maker to become a privately held company.
Last week, KKR and Chen announced a cash tender offer to buy out Yageo at NT$16.1 per share. The buyout will be carried through Orion Investment Co Ltd (遨睿投資), which is a joint venture set up by KKR and Chen, who also chairs Yageo’s board.
Yageo will be delisted from the Taiwan Stock Exchange after the acquisition is complete, or after Orion obtains a 50 percent stake in Yageo.
“The offering price is not far from the reasonable range,” Yageo said in a statement filing to the exchange.
The NT$16.1 per share offer fell in a range based on the valuation by KMPG International Corp (安侯國際財物顧問) and China Intangible Asset Appraisement Co (中華無形資產賤價股份有限公司), who said the offering price should be between NT$14.77 and NT$20.26 per share, according to the filing.
“Such an acquisition is less common in Taiwan, but it is often seen overseas. In the US, there are a lot of M&A cases that are jointly masterminded by the company’s management and institutional investors,” said Hu Shing-yang (胡星陽), chairperson of National Taiwan University’s finance department.
“There is the concern about conflicts of interest and if the interest of shareholders is well protected, especially when it comes to the offering price,” Hu said. “Independent board directors should play a key role at this moment.”
In Taiwan, the issue is more complicated because the company’s management is usually major shareholders as well, he said.
Maquarie Capital Securities Ltd analyst Jeffrey Su (蘇志凱) said the price was reasonable after factoring in 24 percent stock dilution after KKR converted its holdings of Yageo bonds.
The NT$16.1 offering relects 1.1 times the company’s earnings this year, which would be the high end of the historical trading range, Su said in a research note on March 11.
In the longer term, if the government approves the acquisition, Taiwan could attract more private equity investments in the technology sector, Su said.
Yageo said in the filing that its net income totaled NT$645 million in the first quarter, down about 36 percent from NT$1 billion in the same period of last year, after intensifying competition drove down gross margin to 22.3 percent from 26.9 percent.
Separately, Yageo yesterday said revenues grew 33 percent to NT$2.4 billion last month from NT$1.81 billion in February as customers boosted inventories.
In the January-March period, Yageo’s revenues rose 3.7 percent to NT$6.5 billion from NT$6.27 billion a year ago.
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