The American depositary receipts (ADRs) of Advanced Semiconductor Engineering Inc. (ASE) closed down more than 5% on Wall Street overnight. That’s due to a strategic alliance announced by Siliconware Precision Industries Co. and Hon Hai Precision Industry Co.
ASE is one of Taiwan’s leading integrated circuit packaging and testing services provider. It announced last week an offer to buy up to a 25% stake in Siliconware, a rival company. ASE was offering NT$45 (about US$1.4) per share, but Siliconware urged its shareholders not to sell to ASE, saying that the price is too low.
Then on Friday, Siliconware announced that it had reached an agreement with Hon Hai, the world’s largest contract electronics maker, to set up a strategic partnership. Market analysts said that the alliance with Hon Hai is aimed at preventing a possible takeover by ASE.
Under the agreement, Siliconware and Hon Hai will launch a stock swap by issuing new shares with one Hon Hai share in exchange for 2.34 Siliconware shares. After the deal, Hon Hai will own a 21.24% stake in Siliconware and become its largest shareholder. The stock swap deal is pending approval from Siliconware’s shareholders.