Shares of Chunghwa Picture Tubes jump on acquisition deal with GiantPlus


CNA

TAIPEI — Shares of Chunghwa Picture Tubes Ltd., a Taiwan-based flat-panel maker, moved sharply higher Tuesday morning after the company announced it would acquire a bigger stake in subsidiary GiantPlus Technology Co., dealers said.

The company’s increased holdings of GiantPlus, which specializes in flat panel module production, are expected to help Chunghwa Picture Tubes speed up the pace of its vertical integration in the business, they said.

As of 11:30 a.m., shares of Chunghwa Picture Tubes had added 7 percent, the maximum daily increase, to NT$1.02 (US$0.03) with 5 million shares changing hands, while shares of GiantPlus had gained 2.99 percent to NT$9.29 on trading volume of 7.06 million shares.

The benchmark weighted index on the Taiwan Stock Exchange was down 0.11 percent at 8,029.48

“Due to its low share price, the acquisition news prompted bargain hunters to buy into Chunghwa Picture shares soon after the local bourse opened,” Grand Cathay Securities analyst Mars Hsu said.

“Once Chunghwa Picture Tubes gets a larger stake in GiantPlus, it’s expected to have a bigger say in GiantPlus’ operations, which could strengthen Chunghwa Picture Tubes’ vertical integration,” Hsu said.

At a news conference Monday, the company announced it would launch a tender offer to acquire 18.1 percent of GiantPlus’ shares between March 12 and April 12.

Chunghwa Picture Tubes said it would offer 0.72 common shares of Tatung Co., which is the parent company of the flat panel maker, and NT$4.03 in cash in exchange for a GiantPlus share.

The acquisition price represents a roughly 7-percent premium over GiantPlus’ closing share price of NT$9.02 on Monday.

Chunghwa Picture Tubes said it expects the acquisition to improve its competitiveness because the small and medium screen modules that GiantPlus designs and produces are critical elements of its production.

Currently, displays used in smartphones and tablet computers, which rely on the modules, account for about 75 percent of Chunghwa Picture Tubes’ total consolidated sales.

Market analysts also said that GiantPlus is in talks with new clients for possible orders on smartphones. “The current buying also reflected market optimism toward global flat panel makers,” Hsu said. “Buying now is spreading to second-tier makers, like Chunghwa Picture Tubes, from its first-tier rivals like Innolux Corp. and AU Optronics Corp.”

Hsu said it remains to be seen, however, when Chunghwa Picture Tubes will turn a profit, after having incurred a net loss for nine quarters in a row as of the third quarter of last year.

“As a second-tier supplier, Chunghwa Picture Tubes has lagged behind in competing with its larger rivals. I think the company will continue to post losses this year,” Hsu said.

In the first nine months of last year, Chunghwa Picture Tubes had a net loss of NT$9.74 billion, or NT$1.50 in loss per share, compared with NT$8.64 billion in net loss, or NT$1.33 per share, during the same period of 2011.