STATS ChipPAC attracts US$780m bid from China firm

Singapore

STATS ChipPAC is inching towards the arms of Jiangsu Changjiang Electronics Technology (JCET), with the Chinese buyer proposing on Thursday a muted US$780 million bid for most of the Singapore chipmaker.

But this courtship, already made public earlier this year, has more work ahead. For one thing, the semiconductor firm - which has long been on the selling block - will have to restructure its Taiwanese operations before the sale becomes definitive, regulatory announcements showed.

Given the ongoing restructuring process at STATS ChipPAC's Taiwanese subsidiaries, the sale transaction would not include the two units at this point - which have a separate book value of US$80.9 million in total.

The offer stands at S$0.452 per STATS ChipPAC share on a fully diluted basis - or the assumption that all outstanding share options and share awards are exercised and vested.

This compares against the counter's last traded price of S$0.58, which reflects a discount of about 20 per cent for the entire entity based on its market price. Trading in its shares had been halted since Monday. STATS ChipPAC's book value per share though was S$0.40, Bloomberg data showed.

The restructuring process is a familiar one for STATS ChipPAC. The homegrown semiconductor firm was in the red last year, dragged by plant closure costs of over US$35 million that were linked to its Malaysian operations.

JCET, even as China's largest electronics packaging service firm, will be swallowing up a much larger business from a turnover perspective.

The Shanghai-listed company made sales of US$830 million last year - about half of the US$1.6 billion in revenue made by loss-making STATS ChipPAC in the same period.

For the transaction to go through, JCET will also have to secure various regulatory approvals from Chinese authorities, and has pledged to pay US$23.4 million to STATS ChipPAC if it doesn't receive the blessings of the Chinese authorities by a yet-to-be-disclosed date.

"There is no assurance that the JCET proposal received by the company will result in any definitive agreement or transaction," STATS ChipPAC said.

If the union is achieved, the last Temasek-controlled chipmaker in Singapore will be sold off, with Chartered Semiconductor Manufacturing disposed of in 2009. In August, STATS ChipPAC confirmed that it had been approached by two Chinese suitors - later reported to be JCET and Tianshui Huatian Technology Co - after being prompted by a regulatory query in response to a sudden surge in its share price.

That month, its shares hit a three-year high of S$0.75. This also followed announcements in May by the company that it had been approached by interested parties.

STATS ChipPAC shares took a beating after the company said in September that Tianshui Huatian Technology had pulled out of talks.

With all the rough and tumble, the counter has nonetheless gained about 75 per cent since the start of the year.

Worldwide sales of semiconductors in the third quarter grew 8 per cent from a year ago to US$87 billion, showed data from the World Semiconductor Trade Statistics as cited by the Semiconductor Industry Association - a US lobby group - this month. The rise in semiconductor sales was the strongest in Asia Pacific, at 12 per cent from the year-ago period.

Still, the electronics sector's contribution to overall manufacturing output in Singapore has shrunk. In 2012, its share represented about 25 per cent on a value-added basis, which measures the gross output after deducting the value of intermediate inputs used in production. In 2005, its share was about 35 per cent.