Shares of Siliconware Precision Industries Co Ltd (SPIL, 矽品精密) surged 8.82 percent yesterday, one day after rival Advanced Semiconductor Engineering Inc (ASE, 日月光半導體) launched an unsolicited NT$35 billion bid to buy a 25 percent stake in SPIL.
If the deal pushes through, it would mark a major industry consolidation in the global chip packaging and testing industry. Most analysts hold a positive view of the consolidation.
The stock price of SPIL soared to NT$40.10 yesterday after ASE said on Friday last week that it planned to offer NT$45 per share to buy 779 million shares of SPIL on the open market in Taiwan and in the US from Monday to Sept. 22.
The offer represented a 34 percent premium to SPIL’s closing price of NT$33.50 on Friday.
“We believe incremental industry consolidation is a positive, especially in the face of Jiangsu Changjiang Electronics Technology Co’s (江蘇長電) [proposal] to buy STATS ChipPAC Ltd last year,” JPMorgan analyst Gokul Hariharan said in a report.
ASE and SPIL have a combined 28 percent share of the global chip testing and testing market, according to JPMorgan’s tallies.
“SPIL was clearly exposed to threat from Chinese players much more than ASE — so collaboration could improve pricing power substantially,” Hariharan said.
SPIL chairman Bough Lin (林文伯) is facing a tough battle to defend his control of the world’s No. 2 chip packager. Lin only owns 2 percent of SPIL, while the company’s board directors hold 5.16 percent in total.
“Considering the attractive price of NT$45 and foreign investors holding about 58 percent of SPIL’s shares, our analysis of various defensive measures indicates that any resistance by SPIL is likely to be futile,” CIMB analyst Peter Chan (詹逸群) said in a report.
Chan reiterated his “add” rating on both stocks, based on the assumption that SPIL would not implement any defensive measure that could undermine shareholders’ interests.
SPIL said it has formed a committee to review ASE’s offer and advised shareholders not to sell before the committee reaches a decision.
The committee, composed of SPIL’s independent board directors, including Unite Microelectronics Corp’s (UMC, 聯電) honorary vice chairman John Hsuan (宣明智), is to spend seven days to review the offer after receiving a formal notification yesterday.
SPIL has hired JPMorgan Chase & Co as its financial adviser, Simpson Thacher & Bartlett LLP as its US legal counsel and Jones Day as its legal counsel in Taiwan.
Jih Sun Securities Investment Consulting Co (日盛投顧) suggests investors buy ASE and SPIL shares, given the attractive premium and potential synergy from the consolidation.
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