Asustek board approves spinoff plan

DIVISION OF LABOR: The company said it would split its contract manufacturing and brandname business units to enhance competitiveness and operational effectiveness

By Kevin Chen  /  STAFF REPORTER

Sun, Sep 30, 2007 - Page 12

Asustek Computer Inc (華碩電腦), the world's largest manufacturer of computer motherboards, said yesterday its board approved plans to spin off its contract production business in a bid to improve competitiveness while avoiding conflict with clients.

The company said it would separate its contract manufacturing business from its brandname business and expected the separation to take effect on Jan. 1 next year, a filing submitted to the Taiwan Stock Exchange yesterday showed.

Asustek said it would spin off its computer-related contract manufacturing unit, including assets and liabilities, to Pegatron Technology Corp (和碩聯合科技), while separating its production of computer casings and molds as well as other non-computer related assets into Unihan Technology Corp (永碩聯合國際), the filing said.

"The purpose of this separation is to implement organizational restructuring and professional division of labor, and thus to enhance competitiveness and operational effectiveness," the company said in the filing.

The board's decision will be subject to shareholders' approval on Oct. 30, the company said.

Asustek first announced its attempt to spin off its contract business in June last year amid growing concern among its clients over the momentum of the company's brand operations. It followed a similar move by Acer Inc in 2002 when the Taiwanese PC vendor spun off its contract manufacturing and design unit into Wistron Corp (緯創).

On July 2 this year, Asustek briefed the media on a detailed plan for the spinoff, with company chairman Jonney Shih (施崇棠) saying the move was unavoidable if the company wanted to stay afloat in the personal computer industry.

"It is not easy for Asustek to achieve the scale required today in both the brand and contract businesses ... It is [therefore] time for a spinoff," Shih said at the time.

Shares of Asustek yesterday dropped NT$0.5, or 0.5 percent, to NT$98.8, compared with a 0.69 percent gain in the benchmark TAIEX.

News of the Asustek board's approval for the spinoff plan was released after the local stock market closed. The stock has risen 9.42 percent so far this year.

Asustek expects no impact on the company's net value per share and earnings per share following the business separation, as the two firms would be 100 percent owned by Asustek and the separation process would involve no capital reduction, the filing said.

In another filing to the stock exchange yesterday, Asustek said it would also consolidate eight overseas units with a total net value of NT$18.56 billion (US$561.67 million) into Pegatron Technology.

The company also decided to integrate another overseas contract-making unit, Casetek Holdings Ltd, into Unihan Technology, it said.

Based on the spinoff plan Asustek revealed in July, Pegatron Technology would focus on contract PCs and related products, while Unihan Technology would target the non-PC segments, including broadband equipment, game consoles and casings.

Following the completion of the spinoff, Asustek will own 1.6 billion common shares in Pegatron Technology at NT$43.75 per share and 800 million common shares in Unihan Technology with NT$15 each.