PETALING JAYA: The race to acquire Silterra Sdn Bhd has taken on a new course with one contender told to match the price of another bidder.
In the latest twist of the tussle for the loss-making wafer foundry from Khazanah Nasional Bhd, sources said Dagang Nexchange Bhd (DNeX) has emerged as the frontrunner, but it is now being asked to match the bid price of Nuglobal Ventures Sdn Bhd (NGV).
Khazanah had earlier opened up the bid for Silterra to foreign investors, which attracted global giants such as Taiwanese semiconductor manufacturer Foxconn and German-based semiconductor foundry X-Fab.
Foxconn was said to have ascribed an enterprise value of US$125mil, of which it would pay US$87.5mil for a 70% stake while X-Fab put in an offer of US$70mil.
But the foreign players are now out of the picture with Khazanah deciding against the idea of selling Silterra directly to foreign owners, but only to those that have formed partnerships with local firms. This leaves DNeX and NGV as the last remaining bidders.
The major question now is, what was the price offered by NGV?
Initial reports had pegged NGV’s offer at RM273mil. However, sources said the firm had made a second offer up to the tune of RM336mil, with a request to facilitate a more flexible equity condition in the future. This also assumes all the debts and liabilities of Silterra.
It is possible that Khazanah, the vendor of Silterra, may insist on the RM336mil price tag, considering that the former is under pressure to sell the fiercely-fought-after Silterra to the highest bidder so as to avoid any concerns of favouring one party over another.
One banker familiar with the sales process points out that the request attached to the RM336mil offer is not onerous on Khazanah and merely requests the latter to support the eventual application to the relevant government agencies to allow Silterra to have majority foreign ownership.
“That is a very light condition, so the actual cash offer price by NGV, that also includes an assumption of all the liabilities of Silterra, is at RM336mil. This is the price that should be matched by DNeX, ” he explains.
The problem though, is that the RM336mil price tag is almost RM100mil higher than what DNeX first offered of RM240mil, also for a 100% stake, going by past reports.
If it is successful in the bid for Silterra, DNeX will hold 60% while its partner Beijing CGP Investment Co Ltd holds the remaining 40%.
In an interview with StarBizWeek recently, DNeX’s group managing director Datuk Seri Syed Zainal Abidin Syed Mohd Tahir (pic above) indicated that the group was on an asset acquisition spree as he spoke about the group’s plans to acquire two marginal oil fields and to submit bids for three to four assets over the next few months, for its oil and gas business.
DNeX has also proposed to purchase an additional 60% stake in upstream oil and gas company Ping Petroleum Ltd at US$78mil (RM314.3mil), of which US$40.95mil will be settled in cash and the remainder via issuance of new shares.
A look at DNeX’s balance sheet reveals that the group is in a net debt position of RM73.29mil. The group has just completed a private placement and while it is unclear how much was raised, the group previously said it intended to raise RM77mil to RM110mil from the exercise.
But can it afford all those assets, including the new jacked-up price of Silterra?
On the other hand, can NGV also afford a RM336mil price tag and more importantly, is Silterra worth that much?
NGV director Md Radzi Din previously told StarBizWeek that there is opportunity in Silterra due to the new lease of life for 200mm wafer fabs, which is within the chip maker’s manufacturing capability and beyond.
The rise in demand for Artifial Intelligence (AI) and Internet of Things (IoT) devices has led to a surge in 200mm wafers since 2015 due to its more mature processes and demand for analogue semiconductors.
NGV is an investment holding company that leads a consortium comprising local and foreign investors bidding for Silterra.
NGV is controlled by local and bumiputra shareholders while its foreign partner, Orient Excellent – a China-based private equity fund – holds the remaining stake.
The local funding for the exercise will be provided by a private equity technology fund promoted by Green Packet, with access to a funding pool of up to RM500mil.
The technology fund has received a committed funding of RM100mil from Green Packet while additional funds will come from third-party investors, including Kendall Court Ventures Ltd.
The existence of China partners in both DNeX and NGV is understood to be on the basis of a shortage of chip manufacturing capacity in China, which also faces a trade war with the United States.