IC testing service provider King Yuan Electronics Co (京元電) yesterday announced plans to acquire Dawning Leading Technology Inc (東琳精密), an ailing industry peer 33.5 percent owned by King Yuan, to achieve synergy via a whale-minnow merger.
The company is to spend about NT$456 million (US$14.9 million) to buy out Dawning Leading’s other shareholders at NT$3 per share, King Yuan spokesman S.K. Chen (陳壽康) told a news conference at the Taiwan Stock Exchange in Taipei.
The deal is expected to be completed by Nov. 1, and King Yuan would be the surviving company, Chen said.
Dawning Leading was founded in 2006 by King Yuan, memory module supplier Adata Technology Co (威剛科技) and UMC Capital Corp (宏誠創投), the corporate venture arm of semiconductor foundry United Microelectronics Corp (聯電).
Dawning Leading dipped into the red in the final quarter of 2016 and has been struggling with a shortage of NAND flash wafers, which has led to declining sales and a capacity utilization of less than 50 percent.
“We are confident that King Yuan has the resources to stage a turnaround at Dawning Leading,” Chen said, adding that Dawning Leading posted net losses of NT$495 million in the first quarter of this year.
King Yuan’s scale is about eight to 10 times larger than Dawning Leading’s, Chen said, adding that they have an 80 percent overlap in IC businesses and credit lines.
King Yuan’s intervention will hopefully change the minds of banks that have become skittish about Dawning Leading and win their continued support, he said.
Dawning Leading, which specializes in IC and memory card assembly, would complement King Yuan’s business, which predominantly focuses on IC testing, he added.
Following the merger, Dawning Leading is expected to contribute about NT$200 million to NT$300 million in additional monthly revenue to King Yuan and boost its annual sales by 10 to 15 percent, analysis said.
King Yuan would be able to provide new IC assembly orders to Dawning Leading and boost its capacity utilization in the first quarter of next year, the analysts said.
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