Siliconware Precision Industries Co (SPIL, 矽品精密) yesterday gave the cold shoulder to a NT$129 billion (US$3.9 billion) takeover bid by Advanced Semiconductor Engineering Inc (ASE, 日月光半導體).
SPIL’s announcement came on the eve of the deadline set by ASE, the world’s largest chip packager and tester, for the Taiwanese firm to reply to its proposal.
ASE said it plans to fund the buyout deal by using its own capital and by borrowing.
ASE bought a 25 percent stake in SPIL in September, which SPIL, the world’s No. 3 chip packager and tester, considered a hostile takeover bid and it has been resisting the acquisition.
“It is a big deal for the company’s shareholders, global customers and the stock market. It will take months and even years of evaluation and discussion. SPIL has no timetable on a responses to ASE’s acquisition proposal,” SPIL spokesman Mike Ma (馬光華) said yesterday. “The company does not have to react to such an extremely unreasonable request.”
Last week, ASE proposed acquiring the remaining 75 percent of SPIL by offering NT$55 per share in cash, three days after SPIL announced an agreement to sell a 25 percent stake to Chinese chip designer Tsinghua Unigroup Inc (清華紫光).
Based on the agreement, Tsinghua Unigroup would subscribe to 1.03 billion new SPIL common shares at NT$55 a share.
The SPIL-Tsinghua Unigroup deal came after SPIL’s attempt to win approval to sell a 21 percent stake to Hon Hai Precision Industry Co (鴻海精密) in a share-swap deal totaling NT$35 billion was rejected by the firm’s shareholders.
Tsinghua Unigroup also agreed to buy 25 percent stakes in local chip testing and packaging service providers ChipMOS Technologies Inc (南茂) and Powertech Technology Inc (力成科技) for a combined NT$31.3 billion.
Fitch Ratings on Friday placed ASE on its “Negative Watch” list following the announcement of the SPIL bid.
“We estimate that, if the deal happens and it is funded entirely by debt, ASE’s pro-forma funds flow from operations [FFO]-adjusted leverage could exceed 2.8 times in 2016 from 1.95 times in 2014, compared to our downgrade rating guideline of 2 times,” the rating agency said in a statement.
Fitch said it expected the acquisition would cut ASE’s margin of earnings before interest and tax to 5 percent from last year’s 11.5 percent. The acquisition would also have a negative impact on the company’s cash flow, the agency said.
Fitch said it would be unlikely to consider an upgrade without a substantial boost to ASE’s market share or a reduction in business risk.
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