ASE’s ADRs fall over 5% af­ter Sil­i­con­ware-Hon Hai tie-up

The China Post - - LOCAL -

Amer­i­can de­posi­tary re­ceipts of Ad­vanced Semi­con­duc­tor En­gi­neer­ing Inc. ( ASE), one of Tai­wan’s lead­ing in­te­grated cir­cuit pack­ag­ing and test­ing ser­vices provider, closed down more than 5 per­cent on Wall Street overnight due to a strate­gic al­liance an­nounced by ri­val Sil­i­con­ware Pre­ci­sion In­dus­tries Co. and Hon Hai Pre­ci­sion In­dus­try Co., deal­ers said.

“The tie-up be­tween Sil­i­con­ware and Hon Hai will likely af­fect a ten­der of­fer by ASE to ac­quire a stake in Sil­i­con­ware. The selling in ASE’s ADRs sim­ply re­flected such wor­ries,” Marbo Se­cu­ri­ties In­vest­ment Con­sult­ing an­a­lyst Chang Chih-cheng said.

“The part­ner­ship be­tween Sil­i­con­ware and Hon Hai aims to fend off ASE’s in­ter­est in a takeover of Sil­i­con­ware,” Chang said.

Overnight, ASE’s ADRs fell 5.07 per­cent, un­der­per­form­ing the broader mar­ket, where the Dow Jones In­dus­trial Av­er­age ended down 0.07 per­cent, while the tech- heavy NAS­DAQ in­dex closed up 0.32 per­cent. ADRs of Sil­i­con­ware also dropped 2 per­cent overnight.

On Aug. 21, ASE an­nounced a ten­der of­fer to buy up to a 25 per­cent stake in Sil­i­con­ware from the open mar­ket be­tween Aug. 24 and Sept. 22 and the ac­qui­si­tion was set at NT$45. Sil­i­con­ware has urged its share- hold­ers not to sell shares to ASE since a fairer price for each Sil­i­con­ware share would range be­tween NT$48.91 and NT$60.58.

Then on Fri­day, Sil­i­con­ware an­nounced it has reached an agree­ment with Hon Hai, the world’s largest con­tract elec­tron­ics maker, to set up a strate­gic part­ner­ship. Mar­ket an­a­lysts said that the al­liance with Hon Hai is aimed at pre­vent­ing a pos­si­ble takeover by ASE.

Un­der the agree­ment, Sil­i­con­ware and Hon Hai will launch a stock swap by is­su­ing new shares with one Hon Hai share in ex­change for 2.34 Sil­i­con­ware shares.

Af­ter the deal, Hon Hai will own a 21.24 per­cent stake in Sil- icon­ware and be­come its largest share­holder, while Sil­i­con­ware will hold a 2.2 per­cent. Even if ASE pur­chases a Sil­i­con­ware stake, its stake will lag be­hind Hon Hai’s since the is­suance of new shares will di­lute ASE’s stake. The stock swap deal is pend­ing ap­proval from Sil­i­con­ware’s share­hold­ers.

How­ever, Sil­i­con­ware said that the part­ner­ship with Hon Hai has noth­ing to do with any in­ten­tion to chal­lenge ASE’s ten­der of­fer. In­stead, Sil­i­con­ware and Hon Hai will co­op­er­ate with each other in high-end IC pack­ag­ing and test­ing tech­nol­ogy de­vel­op­ment to meet the de­mand for smart­phones, wearable de­vices and gad­gets used for the boom- ing In­ter­net of Things sec­tor.

Mar­ket an­a­lysts said that, through the tie- up, Sil­i­con­ware will likely work with Hon Hai’s IC pack­ag­ing and test­ing sub­sidiary — ShunSin Tech­nol­ogy Hold­ings Ltd. — to strengthen ad­vanced pro­cesses, such as sys­tem- in­pack­age and sur­face mount tech­nol­ogy.

In re­sponse to the stock swap be­tween Sil­i­con­ware and Hon Hai, ASE said that its ten­der of­fer will con­tinue to pro­ceed. ASE em­pha­sized that the ac­qui­si­tion price of NT$45 is much higher than the NT$37.86 for each Sil­i­con­ware share in the stock swap with Hon Hai, in­di­cat­ing that ASE has been very sin­cere to­ward Sil­i­con­ware’s share­hold­ers.

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