Apple Supplier Battle Ends in Defeat for Foxconn as Vote Failsby
Shareholders rejected Siliconware's plan to issue more shares
Rival ASE campaigned against deal after taking 25% stake
Siliconware Precision Industries Co. shareholders Thursday rejected two resolutions that would have paved the way for billionaire Terry Gou’s empire to become its biggest shareholder. Rival Advanced Semiconductor Engineering Inc. had campaigned against the move after failing to get a court to block the deal.
ASE, already a supplier of components used in Apple’s smartphones and watches, last month won a tender for Siliconware shares that gave it a 25 percent stake. Siliconware then sought to outflank ASE by turning to Gou, betting that teaming with the assembler of iPads and iPhones would help it win orders from Apple. Under the plan, Siliconware would have received shares in Foxconn’s Hon Hai Precision Industry Co.
ASE had said the planned sale of new shares in Siliconware, or SPIL, at a discount would dilute the stock’s value too much. Shareholder advisers Institutional Shareholder Services Inc. weighed in on ASE’s side.
“The company fails to make a compelling case regarding necessity of the share swap for SPIL’s strategic alliance with Hon Hai,” ISS wrote in a report.
ASE’s shares climbed as much as 8.3 percent to NT$37.90. SPIL’s stock climbed 5 percent to NT$42.80, its biggest gain since August.
Thursday’s extraordinary general meeting failed to pass the proposals, which required two-thirds of votes cast, SPIL spokesman Byron Chiang said by phone. The plan to boost shares garnered 46.6 percent support, while 32 percent rejected it and 21 percent abstained. The proposal to widen the band on asset transaction also failed by a similar margin.
Passage of both amendments would have meant that Foxconn could proceed with plans to take 21.2 percent of SPIL through the issuance of new shares, with the semiconductor company itself getting 2.2 percent of Foxconn’s Hon Hai unit. ASE’s ownership would drop below 20 percent.
To make the Foxconn deal happen, SPIL’s board needed approval to issue 39 percent more shares to accommodate the new stock to be sold to Hon Hai. Shareholders were also asked to allow SPIL’s board to widen the limit on acquisitions and divestitures threefold to 60 percent of its total assets.
ASE couldn’t vote because it purchased its stake after the deadline for becoming a registered shareholder for this meeting.
With Thursday’s failure, Foxconn and SPIL would potentially need to renegotiate the terms of any deal at a lower shareholding if they were to proceed with a share swap.
“SPIL and Hon Hai will create synergies by realizing additional growth from new market opportunities and improving cost efficiencies operationally,” Taichung, Taiwan-based SPIL said in a Sept. 28 statement outlining the share swap. “The value to shareholders derived from the strategic alliance will far exceed the short-term dilution.”
Announcement of Foxconn’s deal came just a week after ASE made an unsolicited tender offer to buy a stake in SPIL at NT$45 per share. SPIL said that’s too low with its shares worth at least NT$48.91 apiece.
Hon Hai’s offer valued SPIL shares at NT$37.8 each based on its closing price the day of the announcement. Janet Chen, an investor relations spokeswoman for SPIL, denied that price calculation while declining to provide the company’s own valuation for the share swap.
Hon Hai gets half its revenue from Apple and is the biggest maker of iPhones and iPads. ASE, which packages and tests chips, also supplies to Apple and provides a key electronics module for the Apple Watch. SPIL is not among the companies on Apple’s supplier list.