Foxconn Expands Chip Business With White Knight Offer for SPIL

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Foxconn Technology Group plans to acquire 21.2 percent of Siliconware Precision Industries Co., helping the chip company fend off a hostile bid while furthering the iPhone maker’s ambitions to diversify.

Hon Hai Precision Industry Co., Foxconn’s largest unit, will take its stake in SPIL in exchange for 2.2 percent of its own shares, the two companies said Friday. The share-swap announcement came hours after SPIL rejected an unsolicited tender offer by larger competitor Advanced Semiconductor Engineering Inc., labeling the bid as too low.

The deal would mark Hon Hai’s biggest investment in the chip industry yet. Foxconn Chairman Terry Gou is looking for ways to broaden beyond assembling electronics for clients such as Apple Inc., which accounts for half its sales. SPIL gets access to the world’s largest electronics manufacturer as competition intensifies in the $13 billion semiconductor packaging and testing industry.

“Foxconn has become SPIL’s white knight, and makes a more logical partner because they can add growth and even lure Apple to use SPIL instead of ASE,” said Vincent Chen, head of research at Yuanta Financial Holding Co. in Taipei.

“Foxconn wants to add more and more services, including semiconductors, that it can offer to clients like Apple and Xiaomi.”

ASE, the world’s largest packager and tester of chips which counts Apple among its clients, on Aug. 21 announced plans to buy a quarter of SPIL’s shares in an unsolicited offer valued at $1.1 billion.

Together, the pair would control more than half of the chip packaging market, Bloomberg Intelligence estimates.

At an announced swap ratio of 2.34 SPIL shares per Hon Hai share, Hon Hai’s bid values the chip company at NT$37.8 a share based on Hon Hai’s Friday closing price, Yuanta’s Chen said.

Janet Chen, an investor relations spokeswoman for SPIL, disagreed with the value while declining to provide an alternative.

Earlier Friday, SPIL had rejected ASE’s bid of NT$45 per share, a 34 percent premium to the stock’s close on the day of the bid. A reasonable price would be NT$48.91 to NT$60.58, SPIL said.

“We hope that our cooperation with SPIL can help us give our clients’ competitiveness a large boost,” Young Liu, a general manager at Hon Hai, said Friday.

Under Pressure

ASE and SPIL face increased competition from Chinese companies including Jiangsu Changjiang Electronics Technology Co., which last year announced plans to buy Singapore-based STATS ChipPAC Ltd.

The share-swap deal is unrelated to ASE’s offer since both companies had been in talks for a long time, SPIL Chairman Bough Lin said Friday without providing details.

Friday’s deal would give Hon Hai 840.6 million shares of SPIL, while the chip company would take 359.2 million shares in Hon Hai. Both companies require shareholder approval and didn’t say when they expect the deal to close.

Hon Hai added 4.7 percent Friday to NT$88.60 in Taipei before the announcement. SPIL shares were unchanged at NT$39.50. ASE added 5 percent amid a 2.5 percent advance in the benchmark Taiex index.

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