Private investment fund to buyout Accton

Irene Chen, Taipei; Steve Shen, DIGITIMES [Thursday 8 November 2007]

Hong Jeng Investment, an investment company under Taiwan-based FAT Capital Management, announced on November 7 a tender offer to initially purchase up to a 10% stake in network-equipment maker Accton Technology as part of a plan to buyout the company in a deal that may be worth a total of NT$10.8 billion (US$333 million).

The network-equipment company, in a filing with the Taiwan Stock Exchange (TSE), acknowledged that it has received a notice of the tender offer from Hong Jeng. Under the tender offer, Hong Jeng will purchase up to 54.45 million outstanding shares of Accton from November 7-16 at NT$20 (US$0.62) per share, or a 22.3% premium over Accton's closing price of NT$16.35 on the TSE on November 6.

The tender offer would be considered as a success if Hong Jeng is able to acquire up to a minimum of 27.23 million shares, or 5% of Accton outstanding shares, during the designated tender offer period, according to Accton's filing.

Once the purchase of 10% of the outstanding shares of Accton has been completed, Hong Jeng will execute its second-round investment plan, aiming to acquire the remaining 90% stake in the company, also at NT$20 per share. With Accton currently capitalized at NT$5.44 billion (or with 54.4 billion shares outstanding), the acquisition deal may reach a total value of as much as NT$10.8 billion (US$333 million), based on data from Accton.

Accton is expected to be merged with a holding company under either Hong Jeng or FAT Capital Management once Hong Jeng completes its purchase of the 100% stake in Accton, according to Hong Jeng president Stephen Tsuei, who also serves as chairman of FAT Capital and vice chairman of component maker Yageo.

After the planned merger, Accton will be delisted from the TSE before debuting once again in the equity market after two or three years of adjustment, said Tsuei, noting that the TSE will be given priority as the location for the debut of the new company.

The buyout will not alter the current management team at Accton, although Hong Jeng will also bring in new strategic investment partners to help Accton build up its long-term development plans, Tsuei stated.