Singapore firm launches $1.6B buyout of Stats ChipPAC

March 1, 2007 – Singapore Technologies Semiconductors Pte. Ltd. (STS), a subsidiary of state-owned holding firm Temasek Holdings Ltd., has filed a $1.6 billion cash offer to acquire full ownership in backend services firm Stats ChipPAC.

The offer price of ~US $1.15/share ($11.45 per American depositary share) represents an 18.2% premium over the company’s Feb. 28 closing price, and a 55% premium over its stock price from six months ago. If the acquisition is closed quickly and STS’ stake exceeds 90%, the offer will be increased to about $1.23/share ($12.30/ADS), a 24% premium. STS would also take about $265 million worth of Stats ChipPAC’s convertible notes due in 2008.

STS already holds a 36.5% share in Stats ChipPAC. It is one of the largest shareholders in Singapore foundry Chartered Semiconductor Manufacturing.

Analysts seems to have opposing views on the proposed deal. The price/premium is a disappointment to Daiwa Institute of Research analyst Pranab Sarmah (cited by Reuters), who pointed out that STS’ proposed valuation may not be high enough to convince other investors into selling their shares. The backend segment of semiconductor manufacturing has seen a surge of interest — as evidenced by a recent surge in Stats ChipPAC’s share price — amid sentiment that the chip industry should see a pickup in 2H07, he added.

Others, however, noted that the pricing is not far off, proportionally, what the Carlyle Group consortium is offering for rival backend services firm Advanced Semiconductor Engineering Inc. (ASE). CIMB-GK Securities analyst Khoo Chen Hsung said Temasek’s offer was at the high end of the company’s trading range of 1-2 times its price-to-book value, according to the Reuters story.

“Things are improving in the chip industry and perhaps some people are thinking there’s some money to be made there at current valuations and buying up stakes or companies,” said analyst Steven Lim at Daiwa SB Investments in Singapore, quoted by Bloomberg.

STATS ChipPAC ranked No.4 in worldwide revenues for semiconductor assembly/test firms in 2006, according to recent Gartner data, in a segment that is gaining in popularity due to rising importance of integrating advanced packaging technologies into the overall function and cost of semiconductor devices. Gartner projects the SATS segment will grow 10.2% growth in SATS revenues in 2007 — its sixth straight year of double-digit growth — as IDMs and OEMs focus more on design and distribution and less on manufacturing, and as the industry continues to transition to advanced packaging technologies.


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