ASE’s ADRs fall over 5% after Siliconware-Hon Hai tie-up


TAIPEI — American depositary receipts of Advanced Semiconductor Engineering Inc. (ASE), one of Taiwan’s leading integrated circuit packaging and testing services provider, closed down more than 5 percent on Wall Street overnight due to a strategic alliance announced by rival Siliconware Precision Industries Co. and Hon Hai Precision Industry Co., dealers said.

“The tie-up between Siliconware and Hon Hai will likely affect a tender offer by ASE to acquire a stake in Siliconware. The selling in ASE’s ADRs simply reflected such worries,” Marbo Securities Investment Consulting analyst Chang Chih-cheng said.

“The partnership between Siliconware and Hon Hai aims to fend off ASE’s interest in a takeover of Siliconware,” Chang said.

Overnight, ASE’s ADRs fell 5.07 percent, underperforming the broader market, where the Dow Jones Industrial Average ended down 0.07 percent, while the tech-heavy NASDAQ index closed up 0.32 percent. ADRs of Siliconware also dropped 2 percent overnight.

On Aug. 21, ASE announced a tender offer to buy up to a 25 percent stake in Siliconware from the open market between Aug. 24 and Sept. 22 and the acquisition was set at NT$45. Siliconware has urged its shareholders not to sell shares to ASE since a fairer price for each Siliconware share would range between NT$48.91 and NT$60.58.

Then on Friday, Siliconware announced it has reached an agreement with Hon Hai, the world’s largest contract electronics maker, to set up a strategic partnership. Market analysts said that the alliance with Hon Hai is aimed at preventing a possible takeover by ASE.

Under the agreement, Siliconware and Hon Hai will launch a stock swap by issuing new shares with one Hon Hai share in exchange for 2.34 Siliconware shares.

After the deal, Hon Hai will own a 21.24 percent stake in Siliconware and become its largest shareholder, while Siliconware will hold a 2.2 percent. Even if ASE purchases a Siliconware stake, its stake will lag behind Hon Hai’s since the issuance of new shares will dilute ASE’s stake. The stock swap deal is pending approval from Siliconware’s shareholders.

However, Siliconware said that the partnership with Hon Hai has nothing to do with any intention to challenge ASE’s tender offer. Instead, Siliconware and Hon Hai will cooperate with each other in high-end IC packaging and testing technology development to meet the demand for smartphones, wearable devices and gadgets used for the booming Internet of Things sector.

Market analysts said that, through the tie-up, Siliconware will likely work with Hon Hai’s IC packaging and testing subsidiary — ShunSin Technology Holdings Ltd. — to strengthen advanced processes, such as system-in-package and surface mount technology.

In response to the stock swap between Siliconware and Hon Hai, ASE said that its tender offer will continue to proceed. ASE emphasized that the acquisition price of NT$45 is much higher than the NT$37.86 for each Siliconware share in the stock swap with Hon Hai, indicating that ASE has been very sincere toward Siliconware’s shareholders.