November 27, 2006 – Reiterating confidence in its business plan to keep its frontend business, ASM International NV nevertheless said it will publish separate frontend and backend segment financial information starting in 1Q07, and now considers the frontend unit to be “financially independent.”
The move follows a shareholder vote rejecting a proposal by a minority shareholder to split up the company. Mellon HBV Alternative Strategies, which had pressured the company to spin off the frontend business, received only about 7 million of the 16 million votes it needed to gain majority support for its proposed breakup, according to a Reuters report.
ASMI says that investments in the frontend unit will no longer rely upon dividends from its 54% stake in its ASM Pacific Technology backend operation. Future dividends will be used to reduce ASMI’s outstanding convertible debt, buy back shares, provide cash dividends to shareholders, or repurchase ASM-PT shares to maintain ownership’s stake.
Following a similar decision reached at its May annual meeting, ASMI supervisory and management board members “have concluded that, at present, the proposed financial independence of the frontend and associated dividend policy is the best way to maximize the value of the ASMI group from both its units,” the company said, in a statement.
Arthur del Prado, president and CEO, added that “investment in innovation” has now started to show up in improved financial performance for the frontend operations, and “we are thus confident that future ASM-PT dividends will not be required for further investment in the frontend operations.”
Mellon HBV applauded the financial separation and independence from ASM-PT dividends, which it called a “cross-subsidization.” However, the group stated that “only the structural solution of a split would solve the significant valuation gap that exists.” Further, the group accused the company of deviating from corporate governance code and lack of outside shareholders representation on the supervisory board, saying ASMI “does not meet the criteria in the eyes of the market to act as a qualified custodian for its EUR 850 million ASM-PT investment.”