I noticed this item given positive mention by Briefing.com
12:01PM ST Assembly Test Services (STTS) 11.14 -2.20: ST Assembly Test Services signed a definitive agreement to acquire ChipPAC (CHPC 8.75 +0.85). CHPC shareholders will receive 0.87 STTS share for each share of CHPC. The proposed name for the combined company is STATS ChipPAC.
Combination makes compelling strategic sense. It leverages the strengths and capabilities unique to each company to create a leading provider of end-to-end semiconductor testing and packing solutions with strong revenue synergies and very little overlap in revenue, customers (one 10%+ customer), R&D and facilities.
The combined firm will have a broad footprint covering the world's major foundry centers (China, Korea, Singapore, Taiwan) and annual revenue of over $1B, and is expected to generate annual cost savings of over $25-30MM.
Individually, CHPC and STTS are among the more attractively valued technology names. Both companies are growing above the industry average, improving capacity utilization and expanding margins. Combined, STATS ChipPAC is positioned to accelerate revenue growth and margins expansion.
We think revenue growth will accelerate, driven by cross-selling opportunities and CHPC's strong competitive position in China (CHPC's largest and fastest growing market with a CAGR (compound annual growth rate) of 45%), as well as continuing improvements in industry fundamentals.
We think the combination will yield incremental margin expansion opportunities, on top of the aggressive measures both management teams took to take costs out of their respective companies during the downturn, driven by revenue and cost synergies and improving capacity utilization. Testing and packaging services generally lag foundry services in a recovery. Note that capacity utilization at leading foundries is running at or above 100% vs. 72% at CHPC (up from 68% in Q2) and 73% at ST Assembly (up from 69% in Q3).
We would buy both CHPC and STTS as stand-alone businesses. CHPC shares are trading at a 12% discount to the offer, making it an attractive option on STTS.--Ping Yu, Briefing.com
Does anyone have any insight into these companies? At Friday's close STTS was at $10.99 and CHPC was at $8.38. The Briefing.com view sounds very positive and seems to see it as a combo better than the sum-of-the parts. The discount of CHPC to the merger value looks very attractive. |
