China Said to Seek Concessions in Review of MediaTek Deal
China’s competition regulator is seeking concessions from MediaTek Inc. (2454) and MStar Semiconductor Inc. (3697) before it approves a merger between the Taiwanese makers of chips used in televisions, two government officials with knowledge of the matter said.
The Ministry of Commerce is seeking to address concerns raised by Chinese TV producers that Hsinchu, Taiwan-based MediaTek will control too large a share of their market once the deal closes, the officials said, asking not to be identified as the information is private. The officials didn’t specify what remedies the ministry is seeking.
Mofcom, as the commerce ministry is known, is the final hurdle to a $3.8 billion takeover of MStar that will give MediaTek control of more than half the global market for chips used in televisions. The deal, announced a year ago, has cleared regulators in South Korea and Taiwan, with the Korea Fair Trade Commission approving the deal with conditions including price cuts in certain product lines.
MediaTek may command as much as 80 percent of the Chinese market for chips used in TVs once the deal closes, according to Mark Li, a semiconductor industry analyst at Sanford C. Bernstein & Co.
The Ministry of Commerce didn’t respond to a faxed request for comment on the merger review. MediaTek Chief Financial Officer David Ku didn’t return three phone calls. Angela Luan, an investor relations official at MStar, declined to comment on the approval process. The companies announced on June 17 that they expect the deal to close by Nov. 1, postponing the closing date for a third time.
Shares of MStar currently trade 16 percent below the value of MediaTek’s stock and cash offer, indicating investors are doubtful that the deal will close. MediaTek already owns 48 percent of MStar, a stake it acquired last year.
Mofcom has given 18 conditional clearances out of the almost 500 transactions it had reviewed as of September 2012, according to Mark Jephcott, a Hong Kong-based partner at Herbert Smith Freehills LLP. In the case of commodities trader Glencore Plc’s acquisition of Xstrata Plc, China required Glencore to divest a copper mine in Peru as one of its conditions for approval.
In March 2012, Mofcom cleared Western Digital Corp.’s $4.8 billion acquisition of Hitachi Ltd.’s hard-disk drive unit after imposing a condition that it operates the acquired business as an independent competitor for a minimum of two years.
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