An interesting deal on Monday brings further signs of recovering activity among Middle Eastern sovereign wealth funds — and an emerging new force in the global semiconductor business.
Advanced Technology Investment Co., owned by the government of Abu Dhabi, has agreed to buy Singapore-based Chartered Semiconductor Manufacturing for S$2.5bn ($1.8bn) in cash, and plans to combine it with its Globalfoundries, a joint venture with Advanced Micro Devices of the US.
The deal, which is subject to regulatory approval, would make the combined company one of the world’s biggest semiconductor manufacturers, alongside Taiwan’s TSMC and other big chipmakers.
It also highlights the push by Temasek, one of the Singapore government’s key investment arms which owns just under two-thirds of Chartered Semi, to sell its stake in Chartered Semi, which makes chips used in Microsoft’s Xbox 360 game console, among other things.
It is ATIC’s second major investment in the industry this year, following its decision to hook up with Advanced Micro Devices and create Globalfoundries in March. The company was only just formed – in October 2008 – with a mandate “to generate returns that deliver long-term economic and social benefits to Abu Dhabi,” according to the FT.
Under the deal, ATIC will acquire Chartered Semi’s ordinary shares for S$2.68 cash per share, representing an equity value of about S$2.5bn ($1.8bn) and valuing the company at S$5.6bn including debt and convertible redeemable preference shares.
The price represents a premium of 14.2 per cent to Chartered’s 30 trading-day volume weighted average price on the Singapore Stock Exchange.
Chartered Semi has struggled to cut costs amid heavy capital expenditure and falling profitability, but Abu Dhabi clearly believes that its combination with Globalfoundries can deliver the kind of “long term economic and social benefits” that Temasek seemed unable to extract from its investment for Singapore.
However, it may be another case of unfortunate timing on Temasek’s part, because things seem to be looking up for Chartered Semi, which on Monday raised its Q3 forecasts for revenue and earnings, with revenue predicted at S$405m to S$415mm, according to Bloomberg.
Not only that, the chipmaker’s share price has more than doubled so far this year.
Related links:
ATIC to buy Singapore’s Chartered Semiconductor – WSJ
When is an SWF not an SWF? – FT Alphaville
SWFs tipped for greater financing role – FT