ASMI Shares Plunge After Plan to Cut Holding in ASM Pacific

ASM International NV fell as much as 16 percent after saying it plans to sell a stake in ASM Pacific Technology Ltd. in an effort to increase the value of its combined businesses.

The company is selling 8 percent to 12 percent of ASM PT, ASMI said in a statement today. The price is HK$88.88 to HK$91.77 a share, according to a term sheet obtained by Bloomberg News, which would raise a maximum of $567 million according to Bloomberg calculations.

“This is clearly disappointing news,” said Jos Versteeg, an analyst at Theodoor Gilissen Bankiers. “People were anticipating a breakup of the company, and this is kind of a setback. I think the company decided it still needs ASM PT as a cash cow.”

The sale follows a study of the market valuation of the combination, after investors pressed ASMI to separate its two businesses. The alternatives that were investigated included a full or partial placement or sale of the company’s stake in ASM PT, a spinoff of shares in ASM PT and merger options, the Almere, Netherlands-based company said.

“A partial secondary placement of 8 percent to 12 percent of the company’s stake in ASM PT is the most suitable step to be taken to address the non-recognition by the markets of the value of the combined businesses,” ASM International said in a statement today.

No Part Two

The company intends to return about 65 percent of the cash proceeds from the divestment to shareholders, using the remainder to strenghten the business. ASMI has no plans to further reduce its stake beyond the mentioned range, said company spokesman Ian Bickerton by phone. “There is no part two, this is it,” he said.

ASMI dropped as much as 4.94 euros to 26.05 euros, the largest intraday decline since 2008. The stock was down 11.8 percent at 27.32 euros as of 12:50 p.m. in Amsterdam, giving the company a market value of 1.72 billion euros ($2.24 billion). Shares of ASM PT closed 2.1 percent lower at HK$96.60 in Hongkong trading today.

ASMI consists of two separate businesses: The front-end division makes machines used to turn silicon wafers into chips. The company also owns about 52 percent of Hong Kong-based ASM Pacific Technology Ltd., the world’s biggest maker of chip assembly and packaging equipment, known as back-end gear. After the share sale ASM will hold 40 percent to 44 percent in ASM Pacific, a term sheet shows.

With the ASMI market value lower than the value of its stake in ASM PT, investors have asked the company several times to break up in the past. In May 2010, the company won backing to postpone discussion on its structure, giving it two more years to restore profitability at the front-end operations.

At a shareholders meeting in May a lawyer for ASMI’s founder and largest shareholder, Arthur del Prado, declared that he might be open to splitting the company in two. The shares have risen 10.7 percent since then, until today.

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