Siliconware Precision Industries Co (SPIL, 矽品) on Monday described a second tender offer from bigger rival Advanced Semiconductor Engineering Inc (ASE, 日月光) as a move that would hurt Taiwan and its IC back-end services industry.
SPIL, Taiwan’s second-largest IC packaging and testing company after ASE, said a merger of the two firms would hurt Taiwan’s economic development.
It was SPIL’s latest public condemnation of ASE’s offer to buy another 25 percent stake in SPIL — an offer made at the end of last year and is to run through March 17, and is seen by many as a hostile takeover bid.
ASE completed a tender offer to acquire 24.99 percent of SPIL shares at NT$45 per share on Oct. 1 last year.
On Dec. 29 last year it announced the second tender offer in response to bids by other potential suitors, some of whom had been recruited by SPIL to counter ASE’s advances.
SPIL said ASE’s second tender offer is now being reviewed by the Fair Trade Commission, and it urged the agency to be wary of ASE’s justification for its offer.
ASE has said that only a merger can effectively upgrade the nation’s packaging and testing sector, and make it more competitive against global players and China’s “red supply chain.”
SPIL has said that ASE is already part of China’s supply chain, and on Monday it added that ASE is deliberately trying to suppress misgivings that a merger would limit market competition and legitimize a “hostile takeover.”
It said the move would have several negative effects, including shifts in clients’ orders, an exodus of personnel and technology, damage to the IC design sector, factory relocations and layoffs.
The firms’ client bases overlap by about 85 percent, so the merger would lead customers to shift an estimated NT$30 billion to NT$45 billion (US$896.78 million to US$1.34 billion) in orders to Chinese rival Jiangsu Changjiang Electronics Technology Co (江蘇長電) and its Singaporean business unit, Stats ChipPac, or US-based Amkor Technology, SPIL said.
It also warned that if the acquisition goes through, ASE will merge production lines and trim staff to cut costs, which SPIL called the “secret” ASE has yet to admit.
On the financial side, ASE has borrowed considerably to finance the takeover plan and will be under pressure to repay those debts while facing dwindling orders and delisting SPIL, which would eliminate at least NT$170 billion from Taiwan’s capital market, SPIL said.
This could lead to a lowering of Taiwan’s weighting on the MSCI indices and an exodus of SPIL’s foreign shareholders, the company said.
SPIL has sought out other partners to block ASE’s bid. Following ASE’s first tender offer, SPIL on Dec. 11 last year announced a deal to sell a 25 percent stake to China’s Tsinghua Unigroup Ltd (清華紫光) through a private placement, which would have diluted ASE’s stake in it to 18.7 percent.
The plan is subject to regulatory approval and while the current government has hinted it supports the idea, president-elect Tsai Ing-wen (蔡英文) spoke against it while campaigning for the Jan. 16 elections.
SPIL has also pursued plans to swap shares with Hon Hai Precision Industry Co (鴻海精密), also known as Foxconn Technology Group (富士康), but the idea was rejected by shareholders because of an unfavorable swap ratio.
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