Asustek Computer Inc (華碩電腦), the maker of the popular Eee PC netbook computers, yesterday announced it would spin off its wholly owned manufacturing arm, Pegatron Technology Corp (和碩聯合), in a move to further separate its growing brand operation from its contract manufacturing business.
The spinoff is set for July 1, by which time Asustek will have incorporated Pegatron Investment Holding Co (和碩投控) which will manage its investment in Pegatron Technology, it said.
Pegatron Holding will issue 2.29 billion new shares, with 25 percent going to Asustek and the rest to Asustek shareholders. Pegatron Technology will be listed in the second half of next year, said David Chang (張偉明), Asustek’s chief financial officer.
“This will help us minimize the potential conflicts between the brand and contract businesses, and increase the operational agility of the two firms,” he said.
The plan also involves reducing the number of Asustek’s issued shares by 85 percent.
The spinoff is subject to approval by a shareholder meeting on Feb. 9. Asustek’s shares may be suspended from trading between mid-June and late July while the capital reduction is completed, Chang said.
Asustek first announced its attempt to spin off its contract business in June 2007 amid growing client concerns about its strong brand operation.
In January last year, Asustek spun off its electronics manufacturing division to two units: Pegatron Technology and Unihan Corp (永碩聯合).
Asustek has vowed to reduce its holding in Pegatron Technology within two years, and a 25 percent holding in the manufacturer should be enough to allay client concerns, said Charles Lin (林秋炭), Pegatron’s chief financial officer.
“Clients have been asking us why the spinoff of the manufacturing arm was half-done, [instead of a clear separation,]” Lin said.
Chang said Asustek would continue to reduce its 25 percent stake in Pegatron in the future, without revealing a timeframe.
SinoPac Securities Corp (建華證券) analyst Allan Pu (卜正倫) said the move would allay brand clients’ fears, but Pegatron must make sure it has strong research and development capability to ensure its competitiveness and gain orders from other clients.
Asustek orders currently account for as much as 80 percent of Pegatron’s total business, he added.
“Pegatron must familiarize itself with the contract manufacturing business model and adjust itself, as it will no longer deal in business within the same family,” Pu said by telephone.
Pegatron saw last month’s sales grow 23.7 percent from a year ago to NT$48.55 billion (US$1.5 billion), with accumulated sales for the first 11 months down 4 percent to NT$419.54 billion.
Its sales for the year should differ from last year’s NT$513.3 million by a “single digit” percentage, Lin said.
Asustek’s shares closed 1.25 percent higher at NT$64.4 in Taipei yesterday before the spinoff announcement was made.
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