The Ministry of Economic Affairs’ Investment Commission yesterday rejected private equity fund Orion Investment Co’s (遨睿投資) NT$46.8 billion (US$1.6 billion) buyout of Yageo Corp (國巨), Taiwan’s biggest maker of passive components used in electronics, citing concerns over the deal’s financial structure and lack of transparency.
Investment Commission Executive Secretary-General Fan Liang-tung (范良棟) told reporters after convening a meeting on the buyout that yesterday’s veto did not mean Taiwan was reluctant to open itself to foreign private equity funds.
All 18 commission members voted against the deal. Orion can still appeal the veto to the Cabinet within 30 days.
Orion is owned jointly by Yageo founder Pierre Chen (陳泰銘) and US investment fund Kohlberg Kravis Roberts & Co LP (KKR).
On April 7, Orion offered to buy a majority stake in Yageo for NT$46.8 billion in cash, or NT$16.1 per share.
One reason the commission rejected the buyout was that minority stakeholders’ interests could be at risk because of a lack of transparency in the stake--buying prospectus, while it deemed the NT$16.1 per share purchase price to be too low, Fan said.
Yageo shares closed down 1.4 percent at NT$13.7 on the Taiwan Stock Exchange yesterday after the rejection was made public. In the past year, Yageo shares have moved between a high of NT$15.9 and a low of NT$12.3.
The commission also raised concerns over Orion’s plan to take out NT$28 billion in syndicated loans to fund the purchase.
Heavy financing could strain Yageo’s capital structure because bank loans would account for 70 percent of the purchase price — higher than the legally allowed two-thirds cap, the commission said.
The commission rejected the buyout after the Financial Supervisory Commission on Friday last week raised concerns about Orion’s plan to delist Yageo from the local bourse given the company’s weight in the technology sector and the likelihood that its capital base would be weakened by the buyer’s financial plan.
The Investment Commission made its verdict before the Friday deadline for the buyout attempt, which has already been extended by one month.
Regulations require buyouts to be carried out within 50 days of their announcement, while the buyer may extend the tender offer by one month.
The Fair Trade Commission, which oversees large deals to avoid the formation of monopolies, however, gave the green light to the Yageo purchase last month.
In response to the commission’s rejection, Orion yesterday said in a statement that Yageo would stick to its existing development strategies and KKR would maintain its partnership with the Taiwanese company.
“KKR will continue to support Yageo and will closely cooperate with company executives and management. As Yageo is the industry leader, KKR is confident in the management’s ability to expand [the company’s business],” Julian Wolhardt, a KKR partner, said in the statement.
One source said that KKR and Chen had not given up on the buyout deal and were exploring further possibilities.
ADDITIONAL REPORTING BY LISA WANG
NO-LIMITS PARTNERSHIP: ‘The bottom line’ is that if the US were to have a conflict with China or Russia it would likely open up a second front with the other, a US senator said Beijing and Moscow could cooperate in a conflict over Taiwan, the top US intelligence chief told the US Senate this week. “We see China and Russia, for the first time, exercising together in relation to Taiwan and recognizing that this is a place where China definitely wants Russia to be working with them, and we see no reason why they wouldn’t,” US Director of National Intelligence Avril Haines told a US Senate Committee on Armed Services hearing on Thursday. US Senator Mike Rounds asked Haines about such a potential scenario. He also asked US Defense Intelligence Agency Director Lieutenant General Jeffrey Kruse
STUMPED: KMT and TPP lawmakers approved a resolution to suspend the rate hike, which the government said was unavoidable in view of rising global energy costs The Ministry of Economic Affairs yesterday said it has a mandate to raise electricity prices as planned after the legislature passed a non-binding resolution along partisan lines to freeze rates. Chinese Nationalist Party (KMT) lawmakers proposed the resolution to suspend the price hike, which passed by a 59-50 vote. The Taiwan People’s Party (TPP) voted with the KMT. Legislative Speaker Han Kuo-yu (韓國瑜) of the KMT said the resolution is a mandate for the “immediate suspension of electricity price hikes” and for the Executive Yuan to review its energy policy and propose supplementary measures. A government-organized electricity price evaluation board in March
NOVEL METHODS: The PLA has adopted new approaches and recently conducted three combat readiness drills at night which included aircraft and ships, an official said Taiwan is monitoring China’s People’s Liberation Army (PLA) exercises for changes in their size or pattern as the nation prepares for president-elect William Lai’s (賴清德) inauguration on May 20, National Security Bureau (NSB) Director-General Tsai Ming-yen (蔡明彥) said yesterday. Tsai made the comment at a meeting of the Legislative Yuan’s Foreign Affairs and National Defense Committee, in response to Democratic Progressive Party (DPP) Legislator Wang Ting-yu’s (王定宇) questions. China continues to employ a carrot-and-stick approach, in which it applies pressure with “gray zone” tactics, while attempting to entice Taiwanese with perks, Tsai said. These actions aim to help Beijing look like it has
China is mischaracterizing UN Resolution 2758 for its own interests by conflating it with its “one China” principle, US Deputy Assistant Secretary for China and Taiwan Mark Lambert said on Monday. Speaking at a seminar held by the German Marshall Fund, Lambert called for support for Taiwan’s meaningful participation in the international community at a time when China is increasingly misusing Resolution 2758. The resolution had a clear impact when it changed who occupied the China seat at the UN, Lambert said. “Today, however, the PRC [People’s Republic of China] increasingly mischaracterizes and misuses Resolution 2758 to serve its own interests,” Lambert said. “Beijing