Compal Electronics Offers $544 Million for Wireless Unit

Compal Electronics Inc., the world’s second-biggest contract maker of notebook computers, offered to buy full control of its wireless-device production division to reduce costs.

Compal Electronics will spend as much as NT$16.1 billion ($543 million) acquiring the 52.2 percent of Compal Communications Inc. that it doesn’t already own, the Taipei-based manufacturer said in a statement yesterday. The bid of NT$50.80 a share represents a 25 percent premium to Compal Communications’ one-month average stock price, it said in a separate presentation.

Compal Electronics, which counts Lenovo Group Ltd. among its customers, is absorbing the unit as a shrinking global notebook market erodes profitability. The second-quarter gross profit margin narrowed to 4.1 percent of revenue from 4.5 percent a year earlier, according to an investor presentation in August.

“We’ll be able to provide a one-stop solution to all our customers” with the integration of the wireless-device business and the parent company, Compal Electronics President Ray Chen said on a conference call yesterday. “We expect total improvement in operating-cost ratio.”

The acquisition, targeted for completion by April 2014, will be funded by cash reserves and operating cash, Compal Electronics said. Its stake in Compal Communications, which is also based in Taipei, is almost 47.8 percent, the company said.

Before it's here, it's on the Bloomberg Terminal.