Advanced Semiconductor Engineering Inc’s (ASE, 日月光半導體) renewed attempt to buy out Siliconware Precision Industries Co (SPIL, 矽品精密) via a holding company does not sound convincing to clients and industry experts, an analyst said yesterday.
ASE’s move came as it aims to clinch a merger with SPIL after the world’s biggest chip packager suffered a setback in its second tender offer to boost its holding in SPIL to a controlling 49 percent stake, from 25 percent.
The unsuccessful takeover bid — coming after ASE failed to obtain permission from the Fair Trade Commission (FTC) to buy the additional stake in SPIL as of the expiration date on Thursday — also thwarts ASE’s ultimate goal to fully acquire its smaller rival.
“It is hard to say whether creating an industrial holding company to run the two companies will help allay the FTC’s concerns [over market competition],” Industrial Technology Research Institute (ITRI, 工研院) semiconductor analyst Jerry Peng (彭茂榮) said by telephone.
The watchdog is slated to make its final ruling before May 1.
ASE’s latest tender offer had solicited better-than-expected support from SPIL shareholders, with about 27 percent of shares of the planned purchase of 770 million shares, which is higher than the 5 percent minimum set by the firm.
The company is proposing to create an industrial holding company, with ASE and SPIL to be affiliated entities under the same umbrella, the company said on Thursday. Under the proposal, the two firms will retain their legal entities and operate independently, ASE said.
ASE said it also intends to retain all SPIL executives, including chairman Bough Lin (林文伯) and president Tsai Chi-wen (蔡祺文), as well as invite both Lin and Tsai to join the board of the planned holding company, ASE chief operating officer Tien Wu (吳田玉) told a media briefing on Thursday.
However, “order loss will be certain as clients will still see their bargaining power weaken since they practically place orders to one supplier,” Peng said.
In addition, the “hostile merger” — as it appears to SPIL for now — could lead to an exodus of a large number of high-ranking executives and industry experts from SPIL, Peng said.
“That will be a serious worry among local semiconductor heavyweights, if those experts accept job offers from China,” he added.
Hong Kong-based BNP Paribas SA analyst Szeho Ng (吳思浩) said ASE faces multiple challenges before the expiration of the tender offer, according to a report released on Monday.
“While a combined ASE-SPIL entity, which will have about 30 percent of global backend [chip assembling] share, might drive better supply discipline, we also expect clients, especially Greater China ones, to inevitably shift away from ASE-SPIL [entity] to avoid supplier and geographical concentration risk,” Ng said.
Ng said ASE’s planned takeover of another 24.71 percent of SPIL’s stakes could result in higher impairment risk and dividend cuts. In addition, the merger would not solve the problem of rising competition from Chinese rivals, Ng said.
Yuanta Securities Investment Consulting Co (元大投顧) said that the tender offer fell through as expected.
However, “we still hold the long-term view that ASE’s intent to consolidate SPIL works in the best interest of its shareholders,” Yuanta analyst Andrew Chen (陳治宇) said in a note.
Under Taiwan’s regulations, ASE would have to wait one year to put forward another tender offer.
Chen said he believes the deal is legitimate and poses no antitrust concerns.
Shares of ASE jumped 1.1 percent to NT$36.9 yesterday in Taipei trading, while SPIL shares fell 0.81 percent to NT$49.25, well below the NT$55 per share offered by ASE.
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