BenQ to shed brand unit and focus on contract work

BenQ, the troubled Taiwanese electronics company, is to shed its brand business and refocus on contract manufacturing in an effort to return to profitability.

In a surprise move, the company on Wednesday said it would spin off brand operations under the BenQ name into an unlisted company that would have paid-in capital of about T$3.5bn ($105m).

The listed entity would make monitors, projectors, mobile devices and other gadgets for branded electronics groups.

The listed company, whose English-language name is yet to be chosen, will have its capital cut by 40 per cent from the current T$25.6bn to about T$15bn to write off accumulated losses.

Lee Kuen-yao, BenQ chairman, said the blow to the group’s branded business after its failed acquisition of the handset arm of Germany’s Siemens was the reason for turning the restructuring plan upside down.

“Our main assets are now in the [contract manufacturing] area,” he said.

The listed company will own 100 per cent of the unlisted branded company.

Mr Lee said that in the long term he would seek to reduce the contract manufacturer’s stake in the new BenQ to under 20 per cent and introduce a strategic investor, but that this could take several years.

The restructuring, which requires the approval of shareholders, differs from plans for dividing contract manufacturing and branded business announced last year.

Until recently, BenQ had told investors it would spin off its contract manufacturing arm and keep mobile operations combined with its branded business.

BenQ had T$14.75bn in revenues from branded operations in the first quarter and T$22.52bn from contract manufacturing.

Analysts said the plan was designed to help management keep control of AU Optronics, the flat panel maker in which BenQ is the largest shareholder. Mr Lee is also chairman of AUO, which investors generally view as a financially viable company.

Over the past year, BenQ’s spiralling losses have forced it to sell and collateralise AUO shares.

Mr Wang, who will continue to run the brand business as vice-chairman of the unlisted BenQ company, insisted that BenQ would soon look at expanding its brand business.

But analysts on Wednesday doubted this. “They might just quietly let it die after a few quarters,” said Kevin Chang, an analyst at JPMorgan.

Most of BenQ’s losses came from the brand business, Mr Chang said. “The contract manufacturing business, while not hugely profitable, is enough to keep the company afloat.”

The restructuring plan came as BenQ reported a T$1.76bn net loss for the first quarter. It was its sixth consecutive loss.

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