UMC, He Jian terminate merger deal
Taiwan’s United Microelectronics Corp. (UMC) has terminated its acquisition agreement with Infoshine Technology Ltd., the holding company of Chinese foundry vendor He Jian Technology Suzhou Co. Ltd. SAN JOSE, Calif. – Taiwan’s United Microelectronics Corp. (UMC) has terminated its acquisition agreement with Infoshine Technology Ltd., the holding company of Chinese foundry vendor He Jian Technology Suzhou Co. Ltd.
This was seen as a blow for UMC, which counted on He Jian for access into the China market. Last year, foundry vendor UMC said it would pay $285 million to acquire the 85 percent of Chinese foundry He Jian that it did not already own. UMC already owned 15 percent of He Jian.
Then, UMC’s proposed acquisition of Chinese foundry He Jian was in jeopardy last year, because of Taiwan government regulations, according to a report issued by a trade group. A report by the U.S.-Taiwan Business Council on the Taiwan semiconductor market states that Taipei is standing in the way of the deal because investment regulations stipulate that there can be no more than three Taiwan chip fabs in China, and that all three are spoken for.
The original merger consideration involved a combination of common shares, ADR and cash as options for payment to He Jian’s shareholders. ”However, an investment regulation governing foreign holdings of Taiwanese securities, coupled with other restrictions from the amended operating rules of the Taiwan Stock Exchange Corporation for issuing new shares to merge foreign unlisted companies, precluded the issuance of common shares or ADR as payment options,” according to UMC.
”Meanwhile, He Jian’s shareholders had not decided whether to accept a cash-only merger. As such, based on considerations of timing and changes in the industry environment, the board resolved today to terminate the merger agreement,” according to UMC.
Going forward, UMC said it will continue seeking possible alternatives with He Jian shareholders, including a full or partial acquisition of He Jian in cash upon revaluation.
At a low-key event in Taiwan earlier this year, silicon foundry vendor UMC celebrated its accomplishments during its 30th anniversary. But will 2010 be UMC’s last party? Despite the current upturn and renewed growth at UMC, many wonder if the foundry vendor will survive in the long run, as the company has fallen behind the technology curve.
At one time, the company sat comfortably as the world’s second largest foundry vendor, behind neighbor Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC). Now, it faces competition from a trio of strong players, including TSMC, GlobalFoundries and Samsung Electronics Co. Ltd.
Going forward, UMC has two choices. The company could continue to go it alone-without a big R&D partner. Or, UMC could get acquired.
Some believe that GlobalFoundries or its big investor–Abu Dhabi’s Advanced Technology Investment Co. (ATIC)–may take a stake in UMC in return for fab capacity. In fact, there was once a rumor that ATIC would buy UMC.
Others believe that TSMC may buy UMC. There have been talks over the years about such a deal taking place.