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Last updated: April 18, 2007 7:16 am

Carlyle drops $6bn bid for Taiwan’s ASE

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One of Asia’s largest potential private equity deals fell through on Tuesday after Carlyle withdrew an offer to acquire Advanced Semiconductor Engineering, the world’s largest chip testing and packaging company, for more than $6bn.

ASE said Carlyle had notified it that it was cancelling its acquisition plan after ASE rejected the private equity group’s second offer that valued ASE at T$39.5 per share. The failure could send a signal of discouragement to private equity investors who have been eyeing Taiwan companies as their valuations have been lower than those on neighbouring markets such as Hong Kong.

ASE shares opened up by their daily 7 per cent limit on Wednesday, before retreating to end the morning session up 2 per cent at T$42.

The buy-out was seen as problematic from the start, with many commentators predicting the Taiwan government would not easily approve the delisting of its leading semiconductor packaging company.

ASE named price as the main reason for the failure to reach an agreement. In February, Carlyle terminated an exclusive agreement reached last November under which Jason Chang, ASE chairman, agreed to sell his 18.4 per cent stake in the company for T$39 per share. The company then appointed an advisory panel to look at the offer.

On Tuesday, ASE said the private equity group had raised its offer to T$39.5 but the panel had rejected this because it felt it still did not reflect the true value of the company. The Financial Supervisory Commission, Taiwan’s regulator, said on Tuesday it still welcomed private equity bids for investment in Taiwan-listed companies if they could help Taiwan’s markets internationalise.

The US group, among the most active private equity firms in Asia, has struggled for 18 months to secure approval from Chinese regulators for a deal involving Xugong Machinery. Freddie Liu, ASE assistant vice-president, said the government had been “supportive” of the planned deal.

Senior government officials said the government was not going to block the deal, but had been in close consultations with ASE and Carlyle over the conditions of a buy-out.

The government had hoped Carlyle could relist part of the acquired company in Taiwan after a takeover. It also intended to impose restrictions on the company’s post-buy-out gearing ratio. Carlyle last night declined to comment. Carlyle was advised by Goldman Sachs, which did not return calls asking for comment on Tuesday.

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