Shares of Greatek Electronics Inc (超豐電子), a small consumer integrated circuit (IC) testing and packaging firm, closed up by the 7 percent daily limit after its bigger rival, Powertech Technology Inc (力成科技), yesterday began a tender offer to acquire the firm at a cost of up to NT$7.14 billion (US$235.1 million).
Powertech’s purchase price of NT$25.28 per Greatek share represented a 26.4 percent premium on Greatek’s closing price of NT$20 on Thursday.
Greatek closed at NT$21.4 on the Taiwan Stock Exchange yesterday, while shares of Powertech, the nation’s biggest chip packager, fell 1.5 percent to NT$65.6, their lowest level since Nov. 25.
Hsinchu-based Powertech announced on Thursday that it planned to acquire a total of between 166.06 million and 282.3 million common shares of Greatek, between 30 percent and 51 percent of its issued shares, at NT$25.28 per share to help diversify its business and increase its profitability, according to an exchange filing.
Powertech is expected to own a controlling stake in Miaoli-based Greatek following the tender offer, which began yesterday and will continue through Feb. 3.
The company would halt the tender offer if it could not obtain a minimum 30 percent stake in Greatek, Powertech deputy spokesman Evan Tseng (曾炫章) said in the filing.
Greatek spokesman Chen Sheng (陳笙) confirmed the 30 percent threshold in a separate filing yesterday.
Powertech had earlier said it hoped to increase revenues of its logic IC back-end business and lower those of its volatile DRAM business because of industry gluts and falling prices.
Credit Suisse said the Greatek deal would allow Powertech to adjust its business mix to 60 percent DRAM, 20 percent NAND flash and 20 percent logic IC, from its current mix of 73 percent DRAM, 24 percent NAND flash and 2 percent logic IC.
“Assuming 51 percent ownership [in Greatek], Powertech would have had [a] NT$0.56 accretion to 2011 earnings,” investment bank Credit Suisse said yesterday in a client note.
As a consumer IC back-end player focusing on low-price and low pin-count packages, Greatek has developed a niche under its low-volume-high-diversity business model which allows it to compete with industry heavyweights such as Advanced Semiconductor Engineering Inc (日月光半導體), Siliconware Precision Industries Co (矽品) and Powertech.
However, Credit Suisse warned the deal could cause a drag on Powertech’s future growth because Greatek’s customer base are producers of lower-end networking and PC products, and it has limited exposure to the higher growth mobile field.
Moreover, ongoing inventory and output adjustments at its customers, particularly Elpida Memory Inc of Japan, because of slowing PC sales would continue to form headwinds in the short term, the note said.