Deal Reporter - Omnivision investment rally leaves bid consortium looking at USD 30 p/s offer – source
The Chinese bid consortium for OmniVision Technologies [NASDAQ:OVTI] is considering slightly increasing its USD 29-a-share indicative offer by USD 1 due to a rally in the market value of the image sensor chip designer’s investments since mid-2014, a source close to the bidder said.
Members of the bid consortium, led by Beijing’s Hua Capital Management and including Shanghai Pudong Science and Technology Investment Co (PDSTI), are still discussing their respective levels of investment ahead of tabling a firm offer, the source added without expanding on the timetable.
Omnivision owns a 13.4% stake in China Wafer Level CSP Co Ltd (China WLCSP) [SHA:603005], an image sensor packaging service provider, which has a current market value of CNY 13.1bn (USD 2.11bn), valuing the company's stake at USD 282m. The stake value has increased 47% -- from USD 188m -- since August 2014 when the bidders first tabled the preliminary non-binding proposal.
Based on the implied USD 1.68bn equity value of the proposed acquisition, OmniVision's stake in China WLCSP would equate to USD 3.2 per OmniVision share. Following the rally in China WLCSP's stock price, the stake is now worth around USD 4.7 per share, according to Dealreporter analytics.
The source said that the bid consortium, as a result, is considering a higher offer price than the originally proposed USD 29 per share, but is trying to keep the offer price below or at USD 30 a share, according to the source.
Meanwhile, Xintec Inc [TPE:3374], a Taiwanese chip packaging service provider which is 11.8% owned by OmniVision, is planning to list on Taiwan's GreTai Securities Market at TWD 42.00 per share on 30 March. Along with the new listing, Xintec will issue an additional 10% outstanding shares to raise further capital to repay debt. Omnivision’s stake will subsequently be diluted to 10.7%.
Omnivision’s investment in XinTec has a book value of USD 4.7m. If Xintec’s value is based on the offering price on a diluted basis, the investment would be worth TWD 1.19bn (USD 37.8m) which is about eight times its initial investment value.
Taiwan IC scrutiny
OmniVision’s seat on Xintec's board means the Chinese bid consortium’s offer, if made binding, will face scrutiny from the Taiwan Investment Commission (IC), said a source familiar with the Taiwanese company and a source familiar with the regulator.
Based on Taiwanese regulations, entities controlled by Chinese company/funds are not allowed to own controlling interests in Taiwanese semiconductor makers, including chip designers, wafer fabrication service providers, assembly and testing firms.
Taiwan IC is likely to request from OmniVision a mandatory resignation of its seat on Xintec's board, said the source familiar with the regulator. The source said OmniVision would be able to keep its stake in Xintec in part of a conditional approval. Typically, an IC review takes up to two months.
OmniVision contributed nearly 29% of Xintec's revenue in 2014 and ranked as its second largest customer, after Taiwan Semiconductor Manufacturing Corp (TSMC) [TPE:2330]. TSMC owns a 39% stake in Xintec and contributed 35% of revenue for the year ended 2014, according to Taiwan stock exchange database.
A spokesperson at Xintec said the proposed take-private offer from the Chinese consortium is unlikely to change the business partnership between Xintec and OmniVision given the high entry barrier of the wafer-level packaging technology used to make image sensors.