Shareholders of United Test and Assembly Center Ltd. on Friday, Oct. 5, approved an approach from private equity shops TPG and Affinity Equity Partners,
but the banks that pledged to back the 2.2 billion Singapore dollar
($1.5 billion) buyout of the Singapore-based semiconductor company are
expected to push the buyers to get better terms.The banks, ABN Amro Bank NV, J.P. Morgan Chase & Co. and Merrill Lynch & Co.,
will be looking to syndicate loans to finance the buyout, which was
agreed to under "covenant lite" conditions -- widely abandoned in the
current credit crunch -- that give buyers tremendous financial
flexibility and lenders little recourse if borrowers fall on hard times.
TPG reportedly brought the financing structure to Asia earlier this
year with its failed A$11.2 billion ($9.4 billion) approach for
Australia's Qantas Airways Ltd.
Philip Lee, head of J.P. Morgan's Asian investment banking
activities, has been widely quoted as saying financing major deals has
become difficult in Asia and, though he has stopped short of commenting
on his bank's involvement in the UTAC deal, said at a recent conference
that he thought it would be the last covenant-lite arrangement for some
time.
UTAC provides test and assembly services for a range of semiconductor devices, including memory and logic integrated circuits.
As the UTAC buyout is now structured, TPG and Affinity would pay
S$1.20 per UTAC share, a 10% premium to the stock's close the day
before talks became public. Some shareholders have said the premium was
too low but no counterbids surfaced to challenge the initial offer.
Financial investors have been wading into Singapore amid a broader
consolidation in the Asian electronics industry. In March, Singapore's
state-owned investment group Temasek Holdings Ltd. offered up to $1.6 billion in cash to buy out the remaining shares in chip-packaging firm Stats ChipPac Ltd. It ultimately garnered only 83.1% of the company's shares.
In April, Kohlberg Kravis Roberts & Co. struck a deal to take over computer disk-drive components maker MMI Holdings Ltd. that would value MMI at about $660 million.
