The Investment Commission yesterday rejected audio electronics maker Merry Electronics Co’s (美律) proposed sale of a 25.4 percent stake in the company to a Chinese connector supplier, saying that the deal might have a negative impact on the nation’s audio electronics industry.
In December last year, Merry announced that it wanted to sell 63 million shares worth NT$3.78 billion (US$117.08 million) to Luxshare Precision Industry Co (立訊) in a bid to secure funds for technical upgrades and capacity expansion.
Through the deal, Luxshare would have become the largest shareholder in Merry and have taken three seats on the company’s seven-seat board. Merry’s management team has a combined 20 percent stake in the firm.
“We believe Luxshare is not going to invest, but acquire Merry, which we think would have a negative effect on Taiwan’s audio electronics industry,” Investment Commission Executive Secretary Emile Chang (張銘斌) told a news conference.
Chang said that excluding the two independent board seats, the Chinese company would have controlled three of the other five seats on Merry’s board.
In other words, Luxshare would have had de facto control of Merry through the deal, Chang said.
Merry, the nation’s leading audio electronics company, produces headphones, speakers, microphones, batteries and personal sound amplifiers. It has a 54 percent market share in the nation’s headphones market, according to Industrial Development Bureau statistics.
Chang said that given that Luxshare is a privately owned Chinese enterprise with no military or government backing, the commission rejected the deal simply due to concerns over industry development, not because of national security concerns.
Chang said the commission understood that Merry planned to raise its competitiveness amid rising Chinese competition through Luxshare’s investment, but he suggested that Taiwanese companies that have similar ideas should emulate the cooperation agreement of Advanced Semiconductor Engineering Inc (ASE, 日月光半導體) and Siliconware Precision Industries Co (SPIL, 矽品精密).
“We hope more Taiwanese companies can form ‘national teams’ like ASE and SPIL to jointly fight intensified international competition,” Chang said.
Merry, which submitted its application to the commission in March this year, had high hopes of obtaining approval from the government for the deal as Luxshare could have helped expand its market share in China and have brought positive effects to the company as early as from the second half of this year.
Merry chairman Liao Lu-li (廖祿立) on Wednesday told a shareholders’ meeting that the company had encountered significant challenges in its operations last year and some of its major clients had agreed that the deal with Luxshare would benefit the company’s operations.
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