Carlyle leads $6 billion bid for semiconductor company

Carlyle confirmed on Friday that a consortium it is leading has submitted a bid to acquire Advanced Semiconductor Engineering (ASE) in Taiwan in an-all cash deal. Carlyle is bidding for 100% of the company in a transaction which values ASE, on an equity value basis, at $6 billion. Including assumption of some debt, the deal size could be about 5% higher.

The Carlyle consortium has offered a price of NT$39 ($1.19) per share for ASE representing a 23.5% premium over the 30-day average closing price of the company. It has also offered $5.94 per outstanding American depositary receipt of ASE with each ADR representing five shares. If successful, Carlyle intends to delist ASE from the bourses.

Carlyle has entered an exclusivity agreement with Jason Chang, chairman, CEO and principal shareholder of ASE, with respect to the 18.4% of ASE he owns. Chang will be part of the Carlyle consortium and will move his shareholding to the holding company through which the acquisition will be effected. Chang is expected to continue in the roles of chairman and CEO. This public-to-private format reflects a growing trend in financial sponsored transactions in Asia.

Carlyle has been investing in Taiwan since 1999. Its portfolio includes investments in Taiwan Broadband Communications and Eastern Multimedia Corporation. Greg Zeluck, managing director and co-head of Asia buyouts at the Carlyle Group says: ôWe believe a potential acquisition of this nature illustrates CarlyleÆs tremendous confidence in Taiwan. If completed, it will reinforce TaiwanÆs status as a first-rate international financial centre and a key destination for global private equity capitalö.

ASE was founded in 1984 and provides semiconductor manufacturing services with a leading position in providing a range of integrated circuit packaging. It is the flagship company of the ASE group.

The semiconductor industry has witnessed a wave of private equity interest. Carlyle itself has investments in Jazz Semiconductor and AZ Electronics, and pending investments in Freescale Semiconductor and Toshiba Ceramics. The Freescale deal valued at $17.6 billion, in which Carlyle is a participant in a Blackstone-led consortium, will be one of the largest technology deals ever done. In August, a KKR-led consortium acquired Philips' semiconductor business for more then $10 billion. Analysts were reluctant to benchmark the pricing of AE's deal with other semiconductor industry deals commenting that ASE is at a different stage of the value chain from the concluded deals.

Zeluck says, as a Carlyle affiliated entity, ASE will be able to ôbetter take advantage of accelerating global outsourcing trends for semiconductor assembly and testing servicesö. Zeluck also comments that he expects ASE ôto benefit from the collective semiconductor know-how and global networks of Carlyle and its portfolio companiesö.

ASE shares closed at NT$35.50 on Friday on the Taiwan Stock Exchange and the ADRs closed at $6.06 on the NYSE. Goldman Sachs is advising Carlyle on the bid. ASE is expected to announce its advisor shortly.