Feb. 28, 2008 – In what is becoming a common sight on public newswires, another chip industry company is airing out some dirty laundry with an unusually public statement about internal affairs — this time ASMI’s rejection of a stakeholder’s calls for replacing its board members.
ASMI has fended off similar calls for several years, most recently in late 2006, though it did separate out the frontend and backend financials, and sold off its NuTool portfolio of plating, planarization/polishing, and deposition technologies.
This time, Fursa Alternative Strategies months ago boosted its stake in ASMI to more than 9% in an effort to influence a changing of the board of directors and facilitate a shakeup in ASMI’s business structure, separating what they consider a historically underperforming frontend business from a healthier backend business (the 53% owned ASM Pacific Technology Ltd.). Fursa claims it has a three-year turnaround strategy involving management changes, discontinuing and divesting non-profitable lines and products, and focusing development on growing sectors such as NCP and selling non-core R&D assets and sub-scale activities. Fursa also thinks it can squeeze out ~€900m (US $1.33B) in value out of the frontend unit, and raise operating margins above the peer group average by 2010.
ASMI’s latest financial results released today in part illustrate why investors deem such a division necessary. The frontend business eked out a profit (€3.4M), while ASM Pacific posted a 10% increase in profits to about $75M. Reuters notes that at current share prices and exchange rates, ASMI’s market capitalization is about €200M below the value of its stake in ASM Pacific.
In the letter to Fursa posted today, ASMI acknowledged it met with representatives from the group’s proposed lineup of “experts” from the wafer processing industry. “On many issues, the analysis and line of thinking of the [Fursa-proposed] team and our management board is aligned in many aspects,” and ASMI is working on resolving certain issues of shared concern, ASMI wrote in the letter.
In other areas of disagreement, though, ASMI said the team’s “opinion on specific matters was not appropriate,” indicating at least one in which the Fursa team “made a major mistake” in assumptions about an ASMI product line’s technical position, a concern “expressed proved to be factually and materially incorrect and ill-founded.”
Also in the letter, ASMI said it extended an olive branch to the investor representatives to act as advisors to company management, but the proposal was “rejected out of hand. It was made clear to us that there was no interest in assisting the current management team, only in replacing them.”