Sat, Aug 29, 2015 - Page 1 News List

Siliconware fends off ASE bid with Hon Hai alliance

SHARE SWAP:While the 21% share sale to Hon Hai prices SPIL at NT$37.86, lower than ASE’s offer, Hon Hai offers high profit and dividends, SPIL said

By Lisa Wang  /  Staff reporter

Siliconware Precision Industries chairman Bough Lin, left, shakes hands with Hon Hai innovation digital system business president Liu Young-wei as they announce a strategic alliance between the two companies in Taipei yesterday.

Photo: CNA

Siliconware Precision Industries Co Ltd (SPIL, 矽品精密) yesterday agreed to sell a 21 percent stake to Hon Hai Precision Industry Co (鴻海精密) via a share swap, as it sought to ward off a larger rival’s NT$35 billion (US$1.07 billion) hostile bid.

The announcement came after SPIL, the nation’s No. 2 chip packager, recommended shareholders reject a tender offer from Advanced Semiconductor Engineering Inc (ASE, 日月光半導體), saying its offer of NT$45 per share was unreasonable.

A better offer would price the company between NT$48.91 and NT$60.58 per share, SPIL said.

Instead, SPIL chose to ally with Hon Hai, the nation’s largest electronics contractor which assembles iPhones and iPads for Apple Inc. Under the deal, Hon Hai is to receive 840 million new shares of SPIL, while SPIL will obtain 359 million shares, or 2.2 percent, of Hon Hai, according to a joint statement.

That translates into one Hon Hai share for 2.34 shares of SPIL and prices SPIL at NT$37.86 per share, which is lower than ASE’s offer and represents a discount of 4.14 percent from its closing price of NT$39.50 in Taipei trading yesterday.

“We intend to form a strategic alliance and discuss future cooperation,” SPIL chairman Bough Lin (林伯文) told a media briefing.

“We have carefully calculated the share price and included several factors, such as both companies’ net value and profitability, unlike [ASE’s] imprudent offering,” Lin said.

To ease shareholders’ concern about Hon Hai’s lower price offer, Lin said that with a 2.2 percent stake in Hon Hai, SPIL would see an increase in cash dividend income, as Hon Hai has a good track record of making strong profits and distributing high cash dividends.

After the transaction, Hon Hai would become SPIL’s largest shareholder, Lin said, adding that there would be no major shake-up of the company’s board or management team this year.

“It is not our priority to [get] involved in SPIL’s management team. Our aim is to create synergy through this strategic alliance,” Hon Hai innovation digital system business president Liu Young-wei (劉揚偉) said.

The alliance is expected to provide clients with an integrated service program through future collaboration on technology and business, the joint statement said.

SPIL will provide chip wire bonding and wafer level packaging technology together with Hon Hai’s module assembly technology to develop next-generation system-level assembly products, since mobile devices such as smartphones and the Internet of Things are getting smaller, slimmer and demand better energy-efficiency, the statement said.

SPIL will also closely collaborate with Hon Hai in developing system-in-package (SiP) related technology to explore future business opportunities.

The deal is pending approval from SPIL's shareholders.

In response to the share swap between SPIL and Hon Hai, ASE said it would continue to proceed its tender offer, adding that its offer of NT$45 per share is much higher than Hon Hai's NT$37.86.

In Taipei trading yesterday, Hon Hai shares soared 4.73 percent to NT$88.60, while SPIL dropped 0.75 percent.

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