United Microelectronics Corp (UMC, 聯電), the world’s second-largest contract chipmaker, said it still wants to acquire China’s HeJian Technology (Suzhou) Co (和艦) after its merger plan was stalled by new regulations from the Taiwan Stock Exchange (TWSE).
The chipmaker will discuss any changes to its offer and how long to wait for a response from the Chinese company, UMC chief financial officer Liu Chi-tung (劉啟東) said by telephone yesterday.
UMC is currently offering cash and may consider issuing new common stock or US depositary receipts in exchange for HeJian shares, Liu said.
Under the TWSE’s new regulations, UMC is not allowed to merge with HeJian by issuing new shares or US depositary receipts and swapping shares with the Chinese firm because HeJian has accumulated losses and fails to meet the earnings requirements set by the TWSE.
Shares of UMC dropped 1.3 percent to close at NT$14.7, the lowest since Friday last week.
“I am not surprised that selling in UMC has emerged today on such unfavorable news, particularly when market sentiment has turned weak amid worries over the high-tech sector’s outlook for the fourth quarter,” TLG Asset Management (台壽保投信) analyst Arch Shih (施博元) said.
Shih said that he expected the merger plan to go through as UMC had showed a determination to expand globally.
“It is just a matter of time,” he said.
The latest development may further delay completion of a deal that was originally expected to be completed by March 31 this year. Hsinchu-based UMC had said in April last year it planned to buy the 85 percent stake in HeJian it doesn’t already own for as much as US$285 million.
UMC said yesterday in a statement that its board held a meeting yesterday and decided to terminate the merger plan with HeJian, a deal that the market expects will be used by the Taiwanese chipmaker as a springboard to penetrate the Chinese market.
Analysts said that the merger with HeJian is expected to broaden UMC’s presence in the global foundry business.
The company already has operations in Singapore and Japan, in addition to Taiwan.
In Taiwan, UMC operates one 6-inch wafer plant, six 8-inch wafer plants and one 12-inch wafer plant, while it owns one 8-inch wafer plant in Japan and one 12-inch wafer plant in Singapore.
Former UMC chairman Robert Tsao (曹興誠) resigned in January 2006 after being indicted for helping HeJian set up a plant in 2002. A district court cleared Tsao of the charges in October 2007 and the High Prosecutors’ Office last month decided not to appeal the not guilty verdict.
The government restricts Taiwanese investment in Chinese companies in a bid to limit technology moving to China.
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