May 26, 2016 / 10:32 AM / a year ago

Taiwan's top two chip test firms ASE, SPIL plan new holding company

TAIPEI, May 26 (Reuters) - Taiwan's top two chip test and packaging companies, Advanced Semiconductor Engineering Inc (ASE) and Siliconware Precision Industries Co (SPIL) , will join hands in a new holding company, the firms said on Thursday.

ASE has spent a year working out the deal, which is part of consolidation in a global semiconductor industry hit by weakening demand and an increasingly saturated smartphone market that underpinned recent growth.

The deal visualises creation of a holding company that will list in Taiwan and the United States, with current securities of ASE and SPIL being delisted, officials of both companies told a news conference.

Both companies, whose boards have one month to approve the deal, are listed in Taiwan, while ASE has American depositary shares on the New York Stock Exchange.

Each will retain its legal entities, management and staff, besides current independent operations and operating models, they said.

The proposed holding company will fully own each company. ASE will swap each of its shares for 0.5 share of the new holding company, while SPIL will exchange each of its shares for T$55 ($1.69) in cash, they said.

ASE is SPIL's largest shareholder, with a stake of nearly 32 percent. The Kaohsiung-based ASE began a campaign to take over its domestic rival last year, buying SPIL shares in the open market and through a tender offer.

Fearing a hostile takeover, SPIL looked to Hon Hai Precision Industry Co, the world's largest electronics manufacturer, and later China's state-backed Tsinghua Unigroup to fend off ASE's advances, but both plans failed.

SPIL shareholders knocked back the plan with Hon Hai, while the Tsinghua effort was terminated in late April in the face of uncertainty about the policy of the island's new government toward investment from China in its technology industry, and opposition from ASE.

Pressure to tie up is particularly intense in segments such as outsourced assembly and testing companies, which include ASE and SPIL, Fitch Ratings warned this month, because manufacturers in a downturn tend to bring more testing and packaging back in-house, sharply cutting outsourcing demand. ($1 = 32.5100 Taiwan dollars) (Reporting by J.R. Wu)

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