A CASH-RICH Middle East sovereign wealth fund has made a $5.6 billion bid to acquire home-grown chip-maker Chartered Semiconductor.
The takeover of Chartered - the world's third largest chip-maker - is the biggest merger and acquisition involving a Singapore company since 2001 when United Overseas Bank acquired Overseas Union Bank.
Abu Dhabi government-owned Advanced Technology Investment Company (Atic) is offering $2.68 a share for Chartered - which operates six chip-making facilities here employing 6,000 workers. Temasek Holdings, which is Chartered's single largest shareholder with a stake of 62 per cent, has agreed to accept the offer.
Analysts said the takeover was not surprising as the foundry industry has been struggling with excess capacity, exacerbated by the global economic slowdown. To stay in the game, chip-makers need economies of scale and the way to achieve this is to merge with other players.
Chartered chairman Jim Norling also stressed the importance of scale and the need for substantial, continued capital investment. For example, it costs about US$5 billion (S$7.1 billion) to build a new chip-making plant.
Chartered chief executive Chia Song Hwee welcomed the offer, adding that Atic's takeover would not lead to 'major redundancies'.
The deal would release additional resources for the 22-year-old company, he added, allowing it to increase capacity at one of its facilities at some stage in the future.
Under the deal, Atic will pay $2.5 billion for the shares and assume $3.1 billion in debt and convertible redeemable preference shares.
The plan is to have Chartered's operations integrated with Atic's chip-making arm, Globalfoundries, which has plants in Germany and one under construction in New York. In future, the two companies may be merged.
Atic paid US$2.1 billion earlier this year for a 55.6 per cent stake in Globalfoundries, a joint-venture with another chip-maker, Advanced Micro Devices. Combined, Chartered and Globalfoundries would become the world's second largest chip-maker by capacity, overtaking current No. 2 United Microelectronics Corp (UMC).
