Taiwan sees fresh burst of buy-out activity

Chunghwa Picture Tubes, Taiwan’s third-largest manufacturer of TFT LCD panels, said on Sunday Warburg Pincus would acquire a 10 per cent stake in the company, the first investment in the sector by a leading private equity outfit.

Separately, a private equity consortium of Taiwanese-backed FAT Capital, Merrill Lynch and H&Q Asia has completed a tender offer for Primax Electronics, one of the world’s largest makers of computer mice, in a US$265m deal due to be announced today.

Private equity activity in Taiwan’s technology sector had eased after Carlyle, the US buy-out group, dropped a planned acquisition of ASE, the world’s largest chip-testing and packaging firm, following strong signals from the government that it would not approve the deal.

Over past months, the island has seen a string of private equity investments in struggling small banks and buy-out deals targeting traditional industry companies. Through these deals, regulators have communicated their willingness to allow smaller private equity acquisitions, often deals that do not involve a delisting of the acquired firm.

CPT said Warburg Pincus had agreed to become a strategic investor in the company through a US$250m private placement of convertible bonds. CPT will hold an extraordinary meeting to approve the deal.

CPT, one of the smaller companies in the flat-panel sector, has become a niche operator, opting out of the race to build large-scale production capacity. As such, analysts view it as a potential takeover target. It is being advised by ABN Amro.

Primax’s new investors said they planned to delist the company in November and let Primax embark on an aggressive acquisition course following the buy-out.

“We will look at both rival keyboard and mouse manufacturers and at component makers,” said Stephen Tsuei, chairman of FAT Capital.