Reports: Is UMC being wooed by private equity?

November 21, 2007 – Local news outlets have conflicting reports about whether Taiwan foundry UMC is in talks with private equity investors in a deal that would formalize the company’s relationship with a Chinese partner and ultimately take the company public in overseas financial markets.

The Taiwan Economic News claims that KKR Private Equity Investors, Texas Pacific Group, and Silver Lake Partners have approached UMC with a buyout offer in order to spin off the company’s 200mm fabs and combine them with those of He Jian Technology, and list the new body on overseas markets. UMC’s 300mm fabs would be reorganized as a new corporate entity, and also listed. The paper cites unnamed “institutional investors” speculating that although major shareholders including SiS, Unimicron, Novatek, Faraday, Kyec Yuan, and Siliconware, might gain the most from such a move, they are unlikely to sell shares to PE interests due to UMC’s ongoing disputes with the Taiwanese government over its disputed relationship with He Jian.

However, UMC has denied these reports, and the company’s ex-chairman Robert Tsao, at the center of the dispute with the government, also has denied being “the engineer” behind the talks, the paper noted. Digitimes notes that UMC’s share price spiked on Nov. 19 on the rumors of a buyout offer, which it claims was about a 25% premium over the company’s current per-share price. But the report cited a spokesperson at Taiwan’s Ministry of Economic Affairs Investment Commission claiming that any buyout proposal would require government approval, and it had received no such application, plus the strained relationship with UMC would suggest “stiff barriers” to any such consideration.

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