MediaTek still pursuing merger deal with MStar

THIRD TIME’S A CHARM?:The chipmakers have had to postpone their merger three times because of Beijing’s reluctance to approve it, but both companies are healthy

Staff writer, with CNA

Mon, Jun 24, 2013 - Page 14

MediaTek Inc (聯發科), the nation’s biggest handset chip designer, has no plan to abandon a merger deal with smaller rival MStar Semiconductor Inc (晨星半導體), despite strong opposition from Chinese authorities.

In the company’s annual general meeting on Friday, MediaTek chairman Tsai Ming-kai (蔡明介) told shareholders that he was optimistic about the merger being completed as scheduled, although the IC designer has repeatedly postponed the deadline for completion of the deal.

Tsai said MediaTek is still in talks with the Chinese Ministry of Commerce and is trying its best to secure approval from the Chinese authorities for the merger, adding that negotiations with China have entered their final stage.

On Monday last week, MediaTek and MStar, the world’s largest supplier of flat-screen TV chips, announced that their planned merger would be postponed from Aug. 1to Nov. 1.

It was the third time the planned merger had been put off since the two companies first announced the deal in June last year. Over the past few months, MediaTek and MStar shares have been affected by uncertainty over the merger.

While the deal continues to await China’s approval, Deutsche Bank analyst Jessica Chang (張幸宜) remains positive about the two companies’ long-term outlooks, as they have seen solid progress in their product development plans.

“No matter how the merger proceeds, MediaTek and MStar will continue to operate in a healthy way, as can be seen by their good progress in smartphones and TV and set-top box segments, respectively,” Chang said in a note on Tuesday.

Fubon Securities Investment Services Co (富邦投顧) analyst Carlos Peng (彭國維) believes China will approve the merger application “in the not too distant future” — either by the end of this year or sometime in the first half of next year, he said in a note to clients issued on Tuesday.

Meanwhile, the company is expected to have a good second quarter in terms of sales growth on strong demand for smartphone chips from Chinese buyers, Tsai said, which would defy the conventional wisdom that the April-June period is the low season for the IC business.

Earlier last month, MediaTek predicted that second-quarter sales would range between NT$30 billion (US$991 million) and NT$31.6 billion, up between 25 and 32 percent from a quarter earlier.

After MediaTek posted NT$23.50 billion in consolidated sales between April and last month, the market expects the IC designer to meet, or even exceed, its sales target without difficulty.

However, Tsai said that owing to the high comparison base in the second quarter, he was afraid that the company’s third quarter sales growth would slow down compared with corresponding periods in past years, despite the July-September period being the traditional peak season.

At the annual general meeting, MediaTek’s shareholders approved a company proposal to issue a cash dividend of NT$9 for last year’s earnings of NT$15.69 billion, or NT$12.9 per share.

Based on MediaTek’s closing share price of NT$330 on Friday, the dividend yield stood at 2.73 percent.

Additional reporting by Kevin Chen