Singapore's Stats ChipPAC is set to announce plans for a sale to Chinese firm Jiangsu Changjiang for an enterprise value of about $1.8 billion, according to a source familiar with the matter.
Controlling shareholder Temasek and Stats ChipPAC will enter exclusive discussions with the Chinese group and plan to announce a voluntary general offer in late November. There will be an undertaking by Temasek to tender its 83.3% stake, the source added.
The deal is expected to be the largest outbound China semiconductor deal in history. Citi is sole advisor to Stats ChipPAC on its sale. Deutsche Bank is advising Jiangsu Changjiang. Stats ChipPAC stock is currently halted from trading.
Citi has a longstanding relationship with Temasek and has a number of mandates with the group in the telecoms, media and technology space. This includes the sale of Chartered Semiconductor for $3.2 billion, Temasek's $1.3 billion selldown of SingTel stock and ST Telemedia’s $250 million investment into GDS Partner.
Meanwhile, Chinese funds have been beefing up their exposure to the semiconductor sector as they seek to reduce an import gap. China is a major consumer of semiconductor chips, which go into making cellphones and laptops, but it lacks the technology. According to the Semiconductor Industry Association, the global semiconductor industry generated sales of about $305 billion in 2013, with a significant portion of semiconductors used for electronics products manufactured in China.
This has spurred deal flow. Since last year, funds have picked up the pace of activity, targeting US-listed Chinese companies. In July last year, Tsinghua Unigroup bought Spreadtrum Communications, a Shanghai-based cell phone chip designer. Months later, it paid $910 million to acquire another cellphone chip maker RDA in November last year.
In June, Shanghai Pudong Science and Technology Investment (PDSTI), a state-owned enterprise under the direct administration of the Pudong district government struck a deal to buy US-listed Montage Technology, which makes set top boxes, for about $693 million.
In August, a consortium of investors including Hua Capital Management, a Beijing-based investment company, and PDSTI submitted a non-binding proposal that values Nasdaq-listed OmniVision Technologies, which develops image sensors for cameras, at $1.7 billion.
