Consolidation in the electronics supply chain continued this week as global broadline distributor WPG Holdings Co. announced plans to acquire a 30 percent stake in rival WT Microelectronics Co. Ltd. for US$266.58 million. WT Micro conducts most of its business in Southeast Asia.
The announcement came within a day of two key electronics suppliers – Yageo Corp. and Kemet Corp. – announcing their merger.
WPG plans to buy 177.11 million shares of WT Microelectronics at NT$45.8 each, representing a 26.87 percent premium compared with WT Microelectronics’ closing price of NT$36.1 yesterday.
“We see this as a financial investment because WT Microelectronics has been delivering decent returns,” WPG spokesman Cliff Yuan told a media briefing at the Taiwan Stock Exchange.
Both WPG and WT Micro recently learned that chip maker Texas Instruments was severing its distribution relationships with the two companies. In such cases, distributors have the option of transitioning their TI customers to alternative parts or deciding to supply TI devices under certain exceptions.
The electronics supply chain has been unsettled by these recent announcements, several sources have told EPSNews. Supplier mergers often result in product-line reduction if the companies have overlapping portfolios. Channel realignment often means customers must seek an alternative distribution partner or amend their bills of material.
WPG expects the investment to pay off as WT Microelectronics has delivered an average return of 13.5 percent over the past two years, Yuan said.
The firm would not get involved in WT Microelectronics’ daily operations, Yuan said.
Wanting to create value for shareholders over the next 10 to 30 years, WPG is seeking investment targets, along with digital transformation, resource integration and financial stability, he said.
The tender offer would be a success if the transaction reaches the minimum of 29.52 million shares set by WPG, its statement said.
WPG reported a rise in net profit of 9.6 percent last quarter to NT$1.79 billion from NT$1.63 billion the previous quarter. On an annual basis, net profit edged 0.9 percent higher from NT$1.77 billion.
As of Sept. 30, WPG had NT$9.63 billion in cash and cash equivalents.