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August 26, 2007 6:04 pm

Temasek tightens grip on Stats ChipPAC

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Temasek Holdings, the Singapore state investment company, appears to have tightened its control of Singapore's Stats ChipPAC following the sudden resignation of five independent board members at the world's fourth-largest microchip packaging and testing group.

Stats gave no reason for the resignations of nearly half of its 11-member board or whether the departing directors would be replaced.

Temasek recently increased its stake in Stats to 83 per cent from 36 per cent as part of a failed $1.6bn bid to take the company private.

Temasek needed a 90 per cent stake to delist Stats from the Singapore Exchange and Nasdaq.

However, the resignations, announced on Friday night, appear to give Temasek control of the remaining six-member board. Earlier this month, Stats said it had appointed Jimmy Phoon, Temasek's chief investment officer, as a board member.

Besides Mr Phoon, the remaining board members include Tan Lay Koon, Stats chief executive, and Peter Seah, a Singapore lawyer who serves on the boards of several other Temasek-linked companies. Those resigning were mainly executives from the private technology sector.

In March, it offered Stats shareholders S$1.75 a share on the condition that it received at least half of the 64.4 per cent of Stats shares it did not own. By the offer’s deadline in May, Temasek had only accumulated a total stake of 83.1 per cent, short of the 93.5 per cent threshold it needed to delist the company.

Temasek did not explain why it mounted the bid to take Stats private in spite of the fact that it was already controlling the company. But analysts speculated that Temasek might have wanted to restructure the group before selling it.

In the past year, there have been moves towards the consolidation of the global microchip test and packaging industry, with private equity funds leading the campaign. Singapore’s electronics manufacturers are under pressure amid fierce competition with rivals based in China and Taiwan, who are regarded as either cheaper on price or providing better customer service.

United Test and Assembly Center, a Singapore rival of Stats and the world’s fifth- largest microchip testing and packaging company, received a $1.4bn takeover bid in June from the Texas Pacific Group and Affinity Equity Partners.

Stats has been one of Temasek's weakest units over the last few years. It recently reported a 59 per cent fall in net profit for the second quarter as sales declined by 11.5 per cent due to a downturn in the global semiconductor industry.

Revenue fell 11.5 per cent to $370m, from $418m a year earlier.

Despite the poor results, Stats share price in Singapore has climbed 21 per cent since Jan 1.

Charles Wofford, the Stats chairman, said the departing directors had played a key role in the transformation and success of the company and "their insights, experience and wise counsel will be missed”.

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