The Carlyle Group is poised to acquire Taiwan’s Advanced Semiconductor Engineering, the world’s largest chip packaging and testing company, in a $6.4bn buyout that would set a new landmark in private equity deals in the technology industry.

The acquisition, which is expected to close early next year, could help ASE win new orders from semiconductor companies recently acquired by private equity firms.

Carlyle and ASE said on Friday that the US private equity group had submitted an indication of interest to ASE regarding a potential acquisition at T$39 a share, and that Jason Chang, ASE’s single largest shareholder and chairman, had already agreed to roll his 18.4 per cent stake into a Carlyle-controlled holding company that would own ASE.

At T$39, the offer price represents a 10 per cent premium to ASE’s closing share price of T$35.50 on Friday, before news of Carlyle’s interest emerged.

Carlyle said the deal could greatly enhance ASE’s market position, because other semiconductor firms in the group’s portfolio and even those owned by other private equity firms were likely to increase outsourcing volumes.

ASE, which is also listed on the New York Stock Exchange, performs packaging and testing services for other chipmakers who do not want to run the capacity for these relatively labour-intensive final steps in the semiconductor manufacturing chain.

Greg Zeluck, Carlyle’s managing director of Asia buyouts, said ASE was likely to win new outsourcing orders from Freescale, Motorola’s former chipmaking unit, which Carlyle is also acquiring.

Freescale is already one of ASE’s five largest customers, but also works with Amkor, its smaller rival.

“There are more outsourcing opportunities from other semiconductor firms in the Carlyle portfolio,” said Mr Zeluck. “I also think that there are additional opportunities from Philips even though we are not an investor there.”

Netherlands-based Philips sold its semiconductor arm to a consortium led by Kohlberg Kravis Roberts earlier this year.

“The private equity industry’s growing presence in the semiconductor industry will push these companies more in the direction of assets-light,” said Mr Zeluck.

Freddy Liu, ASE vice-president, said: “As consolidation is taking place upstream, consolidation is also due downstream in the semiconductor industry. This is a sign of confidence in ASE.”

People close to the situation said an open tender offer would be submitted over the next two months. “With Mr Chang’s agreement to take part, this is pretty much a done deal,” said one person close to the talks.

Based on ASE’s outstanding shares, the offer is worth US$5.5bn. Bankers said including debt, the deal would be valued at US$6.4bn.

Carlyle plans to delist ASE once the deal closes and retain Mr Chang and his brother as chairman and chief executive of the company.

ASE reported T$4.2bn net earnings for the third quarter on T$26.7bn in revenues. Behind US-based Amkor, the company’s biggest rivals are Stats ChipPac of Singapore and Taiwan-based Siliconware.

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