MediaTek merger with MStar wins conditional approval

By Kevin Chen  /  Staff reporter

Wed, Aug 28, 2013 - Page 14

MediaTek Inc (聯發科) and MStar Semiconductor Inc (晨星半導體), the nation’s two leading IC designers, yesterday said they had won approval for their planned merger from Chinese antitrust authorities.

In separate filings submitted to the Taiwan Stock Exchange, the two companies said the Chinese Ministry of Commerce had approved their merger application under certain conditions.

Considering that a work program for their merger conditions still needs China’s approval, plus the process of delisting MStar from the Taiwan Stock Exchange, the companies propose to tentatively change the effective date for the merger to Feb. 1 next year from Nov. 1 this year, according to their filings.

Based on the companies’ filings, the Chinese authorities said MStar’s handset and communication-related chips will be integrated with MediaTek, but it wants MStar’s TV business to be kept as an independent entity.

China also wants MStar to maintain its independence and also a competitor to MediaTek for three years, although the latter can enjoy certain shareholder rights such as consolidated reporting, dividends and board election.

Moreover, the two companies will have to obtain approval from China if they want to acquire any TV chip competitor in the future, and they have to file progress reports to the commerce ministry every three months for three years.

“It is now up to MediaTek and MStar to decide whether these conditions are acceptable,” Yuanta Securities Co (元大證券) analyst George Chang (張家麒) said yesterday in a note. “It is common practice in an antitrust case that companies are requested to maintain two different brands in the end market.”

Chang said if MediaTek decides to maintain minimum resources for its TV business and put most of its efforts into handset, tablet and LTE in order to meet China’s merger conditions, the move could still generate synergy and help MediaTek to better compete in the mobile business in the long-run.

MediaTek, the nation’s biggest handset chip designer, and MStar, the world’s largest supplier of flat-screen TV chips, announced in June last year that they planned to merge in a bid to enhance competitiveness in a deal estimated to be worth NT$115 billion (US$3.83 billion). Thus far, the two companies have postponed the actual merger date for a fourth time since January as they await approval from foreign antitrust authorities.

Yesterday’s announcement was made after the closure of local stock market, where MediaTek shares closed unchanged at NT$367.5, while those of MStar rose 0.2 percent to NT$246.5.