Delta Electronics Inc (台達電) yesterday said that it would continue to seek acquisition targets to diversify its production base to mitigate the effects of the escalating US-China trade war.
The company approved a conditional voluntary tender offer through its subsidiary Delta Electronics Int’l (Singapore) Pte to wholly acquire outstanding shares of Delta Electronics (Thailand) Public Co (DET) to bolster its global manufacturing reach and to boost sales in Southeast Asia.
Delta Electronics, which holds a 20.93 percent stake in DET through its Singaporean subsidiary, is looking to spend up to US$2.14 billion to acquire all of the remaining shares in its Thailand-listed associate company at 71 baht per share, representing a 15 percent bid premium.
While the effects of the first wave of tariffs on Chinese exports to the US are estimated to be limited to about US$5 million, it is difficult to gauge the full extent to the end market, Delta chairman Yancey Hai (海英俊) said, adding that growing uncertainties are likely to diminish investment and spending across industries.
DET, which has been an investee of Delta since its founding in the late 1980s, is an ideal addition to Delta’s manufacturing bases, as Thailand has an established electronics supply chain, Hai told a news conference at the Taiwan Stock Exchange on Tuesday evening.
The Thai company also has manufacturing bases and sales operations in India and Slovakia, bringing additional flexibility for Delta to cope with further tariff moves in other markets.
“Integrating DET would be much quicker compared with beginning anew elsewhere,” Hai said.
Delta intends to keep DET listed on the Thai bourse, as it has long been a fixture among the country’s blue-chip stocks,” Hai said, adding that the company hopes to complete the stake purchase in the next three to six months.
Delta’s diversification plans also extend to Taiwan as it has approved a plan to spend NT$2.7 billion (US$88.19 million) building a third plant at the Southern Taiwan Science Park in Tainan, as well as another NT$1.5 billion on a new research and development center in Taipei.
Delta said that its cash position and bank credit line are more than enough to fund the purchases.
While a portion of the US tariffs is aimed at industrial automation products, Delta is not planning to move its industrial automation manufacturing to Thailand from China, Hai said.
DET is well-positioned to tap into the automotive and electric-vehicle markets, with the categories representing about 10 percent of the Thai company’s annual top line, Hai added.
Automotive only accounts for about 1 to 2 percent of Delta’s annual sales, company data showed.
Delta reported that net income in the past quarter dropped 23 percent annually to NT$3.3 billion, with sales rising 8 percent annually to NT$57.9 billion. Earnings per share were NT$1.26.
During the period, sales contributions from automation and infrastructure rose to 17 and 33 percent respectively as the company cut lower-margin power electronics.
In particular, the sales contribution from automation in the past quarter rose 20 percent annually to NT$10 billion, with infrastructure sales gaining 13 percent annually to NT$19.03 billion.
Hai expects the company to see less pressure on profitability from an ongoing shortage of key components, including metal-oxide-semiconductor field-effect transistors, and other passive components.
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