BLOOMBERG: GlobalWafers in Talks to Buy Siltronic for $ 4.5 Billion
Deal expected to be announced in December, companies say

Chipmakers say deal would create leading player in sector

Taiwan’s GlobalWafers Co. said it’s in advanced talks to acquire Siltronic AG, the German manufacturer of silicon wafers, for 3.75 billion euros (.5 billion), adding to a record year for deals in the global semiconductor industry.

GlobalWafers plans to make an offer at 125 euros a share, a 10% premium to Siltronic’s closing share price on Friday. Silitronic said its executive board considers the offer “attractive and appropriate,” and added that its largest shareholder, Wacker Chemie AG, which has a 30.8% stake, is prepared to sell at the same price.

“The merger would create a leading player in the wafer industry,” Siltronic said in the statement, adding the deal would prohibit job losses in Germany until the end of 2024.

Siltronic shares rose as much as 12% in early trading on Monday, their biggest intraday gain since March. GlobalWafers shares were up 9.8% in Taiwan. It said the deal is subject to regulatory conditions and it can give no assurance a final transaction will occur.

“The deal may fail due to anti-trust review, but if a merger is approved, this will be beneficial to GlobalWafers’ shareholders,” said Richard Hsia, an analyst at Fubon Securities Investment Services Co., in a Monday note.

The combined company would be the world’s largest silicon wafer maker by revenue, with a market share of 32% to 35%, said Hsia.

The takeover would mark the end of a disposal process from wafers for Wacker Chemie, the company majority-owned by billionaire Chairman Peter-Alexander Wacker, which began with Siltronics’ public listing in 2015, 11 years later than first planned. Wacker at the time retained a majority holding in Siltronics, which it subsequently reduced, the remainder of which it now seeks to divest at a time analyst’s predict wafer prices to rise with the market potentially facing supply shortages.

The proposed deal would be GlobalWafers’ largest ever, and one of the biggest in the chip industry this year. It suggests the companies are looking beyond the pandemic to a return to normal business. Siltronic shares have climbed 48% this quarter, driven by expectations that clients will increase purchases of its epitaxial wafers and polished wafers.

The offer will also add to a growing number of semiconductor deals this year that’s set to break the highwater mark for chip acquisitions reached in 2016, when 2 billion in transactions were struck. The largest deal of 2016 was SoftBank Group Corp.’s billion purchase of Arm.

Competition in the industry is heating up as companies that were once customers, such as Apple Inc., design their own chips and established players like Nvidia branch out into new areas.

GlobalWafers shares had gained 32% in the quarter before the announcement, while the Bloomberg World Semiconductor Index added 14%.

Headquartered in Munich, Siltronic is a leading manufacturer of silicon wafers. The firm, which has production sites and offices in Germany, the U.S. and other advanced manufacturing countries, had global revenues of 1.3 billion euros in 2019. The stock trades on Germany’s MDAX Index.

GlobalWafers, majority-owned by Sino-American Silicon Products Inc., reported 2019 revenue of around NT billion ( billion) and operating income of NT billion.

Siltronic and GlobalWafers expect to announce the deal in the second week of December, following discussion and approval by the boards of both companies.

By Yueqi Yang, William Wilkes, and Debby Wu, BLOOMBERG