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Temasek to buy out Stats Chippac

"There's value in chip-related stocks going forward and Temasek's move is quite timely."

Steven Lim, funds manager at Daiwa SB Investments

Temasek Holdings Pte, Singapore's state-owned investment company, offered as much as S$2.4 billion (US$1.6 billion) for shares in Stats Chippac Ltd, seeking to benefit from global demand for semiconductor services.

Temasek will pay S$1.75 a share for Southeast Asia's largest chip tester and packager, or S$1.88 if its stake exceeds 90 percent, the company said in a statement to the Singapore Exchange today.

It will also buy US$265 million of Stats Chippac's convertible bonds if the shareholding level is met, valuing the offer at as much as S$2.85 billion.

Temasek holds 35.6 percent of Stats Chippac.

The purchase follows a 23 percent surge in Stats Chippac shares in the four sessions before Tuesday.

Temasek's offer spurred speculation of further buyouts.

"There's value in chip-related stocks going forward, and Temasek's move is quite timely," said Steven Lim, who helps manage about US$300 million at Daiwa SB Investments in Singapore.

Stats Chippac shares jumped 22 percent to S$1.80 as of 2:21pm in Singapore, poised for a record gain, after being suspended from trading in the morning.

The yield on Stats Chippac's US$149 million 7.5 percent bond due in July 2010 fell 78 basis points to 5.92 percent, the lowest since at least May, Merrill Lynch & Co said. The price rose 2.3 percent to 104.75. Bond yields move inversely to prices, and a basis point is 0.01 percentage point.

The company reported fourth-quarter profit rose 67 percent to a record US$28.3 million and forecast a gain in earnings for the first quarter.

Stats Chippac expected its sales growth this year to outpace an estimated 7 percent for the semiconductor industry, CEO Tan Lay Koon said on Jan. 25.

Global chip sales are estimated to rise 6.7 percent to US$276.4 billion this year and gain a further 8.2 percent next year, researcher Gartner Inc said yesterday.

Temasek manages S$129 billion of assets and is wholly owned by Singapore's Ministry of Finance.

CEO Ho Ching has increased acquisitions abroad in a strategy to have a third of investments each in the city-state, countries that are members of the Organization for Economic Cooperation and Development, and other Asian nations.

Temasek's assets in Singapore fell to about 44 percent of its holdings in the year ended last March, from 49 percent a year earlier, its annual report said.

Stats Chippac was created when ST Assembly Test Services Ltd bought ChipPAC Inc for US$548 million in 2004.

Goldman Sachs Group Inc is advising Temasek, which plans to delist Stats Chippac. Separately, Stats Chippac said it will appoint an independent financial adviser.
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