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30 May 2009

Singapore’s Temasek considers offloading stake in Chartered

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Singapore state investment company Temasek Holdings Pte. Ltd. is considering an offer for its entire stake in Chartered Semiconductor Manufacturing Ltd for about S$2.35 billion ($1.62 billion), reported Dow Jones Newswires, quoting information from two people familiar with the situation.

The offer by Advanced Technology Investment Co., a technology investment firm owned by the Emirate of Abu Dhabi, values Chartered Semiconductor at around S$2.50 per share.

Temasek controls 62.33 percent of Chartered, according to an April 16 filing with the Singapore Exchange.

"Temasek is considering the offer. There have been offers before and a deal was not reached. This time the premium looks attractive," one of the people said.

Chartered, in a filing Friday with the Singapore Exchange, said it hasn't received such a bid from ATIC.

"From time to time, Chartered engages various parties in discussions to pursue business opportunities or concerning the strategic direction of the company, with a view to maximising value for all shareholders," the company said.

"There is no assurance that any definitive or binding agreement will result from these discussions." ATIC declined to comment.

Chartered Semiconductor shares were up 2.3 percent at S$2.23 late Friday in Singapore, after being halted from trade in early morning. If a deal does happen, it would trigger a general offer for the chip maker.

"Temasek has been looking to sell Chartered Semiconductor for about a year," the other person familiar with the situation said.

In October of 2008, ATIC announced a joint venture with Advanced Micro Devices Inc. after the California-based chip maker spun off its semiconductor manufacturing facilities.

The company, called Globalfoundries, is a contract chip maker and competes with Chartered. ATIC invested US$2.1 billion for a 65.8 percent in Global foundries.

DBS Vickers Analyst Ai Teng Tan said a tie-up between ATIC and Chartered would be sensible for both parties. "Right now Globalfoundries has only one manufacturing base in Dresden, Germany, so I think Chartered would complement with an Asian footprint," she said.

"They also [would] have access to Chartered's bigger pool of customers."

She said Chartered would also benefit through strong financial backing from ATIC as well as any spillover orders from AMD, currently Globalfoundries' main customer.

Chartered has been linked to industry peers such as Taiwan Semiconductor Manufacturing Ltd., United Microelectronics Corp. and China's Semiconductor Manufacturing International Corp. in the past on possible mergers, but people familiar with the situation said Temasek hadn't received any palatable offers.

So the investment firm chose to inject more capital into the foundry via a US$300 million rights issue that was completed in April, hoping to sell the stake at a higher price once the market improves, they said.

"Timing wise, I think now is a good time [for the deal] because now we're still in the early stages of a recovery and valuation will reflect that," Ms. Tan said. "If economic recovery continues to move ahead, therefore propelling a full upswing in semiconductor industry, then you have to pay even higher valuation."

The outlook for Chartered remains uncertain amid a protracted global downturn that has severely crimped demand for the semiconductor industry. It recorded a net loss of $114.2 million in the first quarter and expects its second-quarter net loss to range from $54 million to $64 million.

Still, a tie-up with Chartered would allow Globalfoundries to increase its presence and position itself to challenge the existing competitors such as TSMC and UMC once demand begins to recover in earnest.


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