LED chip supplier Formosa Epitaxy Inc (璨圓光電) said yesterday it planned to issue new common shares to raise funds from a Chinese investor via a private placement.
The Longtan Township (龍潭), Taoyuan County-based company said its board approved the management team’s proposal to sell as many as 120 million new shares at NT$19.6 per share to China’s Sanan Optoelectronics Co (三安光電).
Through the NT$2.35 billion (US$80.8 million) deal, Sanan Optoelectronics will acquire 19.9 percent of Formosa Epitaxy via its 100-percent owned Xiamen subsidiary and will become the firm’s largest institutional shareholder, ahead of Japan’s Mitsui & Co, which holds 15 percent.
The two sides will today formally sign a share subscription agreement, to take effect after gaining approval from their respective shareholders, Formosa Epitaxy said in a filing to the Taiwan Stock Exchange. The transaction is still subject to regulatory approval.
The firm is scheduled to hold a special shareholders’ meeting on Jan. 3 to seek approval for the sale.
The global LED industry grown rapidly in recent years as LEDs gain use in wide variety of applications, such as handset keypads, monitors and TV backlights. General lighting applications, such as street lighting, are also expected to support the growth of the LED industry. As an example, China has plans to install 2 million LED streetlights between 2010 and this year in 50 first-tier cities.
Formosa Epitaxy, the second largest LED chipmaker in Taiwan, said the new capital from Sanan Optoelectronics, which is primarily engaged in full-color high-brightness LED wafer and chip manufacturing, would help strengthen its financial position, expand its business scale and enhance its competitiveness, according to the filing.
The announcement came in the wake of market speculation that Taiwanese LED companies were in talks with their Chinese peers, including Sanan Optoelectronics, Hangzhou Silan Azure Co (杭州士蘭明芯科技) and BOE Technology Group Co (京東方), about potential partnerships, a move which analysts said would help re-energize Taiwan’s LED firms in view of the strong potential of the LED lighting market in China.
However, Taiwanese firms would face challenges from such cooperation in the long term, analysts said, because Chinese makers have been quickly upgrading their technology through recruiting engineers from Taiwan-based firms and expanding production capacity.
Moreover, Chinese firms are used to obtaining key technologies and production know-how without sharing profits with their Taiwanese peers, Fubon Securities Investment Services Co (富邦投顧) analyst Lewis Liu (劉立中) said in a Sept. 7 note.
Shares in Formosa Epitaxy moved up by the maximum 7 percent daily limit to close at NT$20.95 yesterday on the Taiwan Stock Exchange before the private placement announcement was made, outperforming the benchmark TAIEX, which was down 0.35 percent.
Trading of Sanan Optoelectronics shares, which closed at 13.1 yuan on Friday, was halted in Shanghai yesterday.
In the September quarter, Formosa Epitaxy reported a net loss of NT$33.67 million, or NT$0.07 per share, on revenue of NT$1.35 billion and a gross margin of 7.09 percent.
In the first three quarters of the year, its net loss was NT$168.68 million, or NT$0.35 per share, with revenue of NT$3.58 billion and gross margin of 3.63 percent, company data showed.