KKR, Yageo CEO Offer $1.1 Billion for ‘Undervalued’ Company
April 06, 2011, 8:47 AM EDTBy Tim Culpan
(Updates with offer valuation relative to last year’s earnings in sixth paragraph.)
April 6 (Bloomberg) -- KKR & Co. and Yageo Corp.’s founder offered about NT$31 billion ($1.1 billion) to buy out the Taiwanese electronic-parts maker after failing to boost the value of the company in the past four years.
Yageo Chairman and Chief Executive Officer Pierre Chen, his family, and funds managed by KKR jointly offered NT$16.10 in cash for each share they don’t already own, valuing Taiwan’s largest passive components maker at NT$47 billion, the companies said in a statement today. The bid, via KKR and Chen’s Orion Investment Co., is 14 percent higher than the previous closing price in Taipei.
The bidders, who together own 34 percent of Yageo, made the offer after last month’s magnitude-9 earthquake crippled scores of Japanese factories that make electronic components. Yageo, which makes components such as ceramic capacitors and inductors, is Taiwan’s cheapest supplier based on projected earnings, according to analyst estimates compiled by Bloomberg.
“Yageo is undervalued,” said Nicholas Teo, head of Taiwan research at CLSA Asia-Pacific Markets in Taipei who rates the stock “buy” with a price estimate of NT$19.00. The reorganization of the company since 2007 hasn’t been reflected in the share price, he said.
KKR Investment
The per-share offer values the stock at 7.3 times estimated 2011 earnings, the lowest multiple among nine Taiwanese component makers tracked by Bloomberg. Yageo climbed 6.7 percent, the daily limit, to NT$15.05 at the 1:30 p.m. close in Taipei today.
Orion’s offer price values Yageo at NT$47 billion after KKR converts bonds it currently holds into shares in the company. That’s 11 times Yageo’s earnings last year.
KKR’s 2007 investment in Yageo prompted the Taiwanese company to appoint Chief Financial Officer Dora Chang and recruit Masayuki Fujimoto from Japan’s Taiyo Yuden Co. as chief technology officer.
Under the management, which included Chen taking over as CEO, the stock jumped fivefold from a low of NT$3.04 in November 2008. As of its previous close, the shares had fallen 11 percent since June 5, 2007, the day KKR announced its initial investment in Yageo. By comparison, Taiwan’s benchmark Taiex index had gained 4.8 percent.
Chen, along with his family, plans to own 55 percent of Yageo and will continue to lead the company, he said in a letter to employees posted on the company’s website today.
UBS AG advised Orion. Paul, Weiss, Rifkind, Wharton & Garrison, Baker & McKenzie, and Simpson Thacher & Bartlett LLP were the legal advisers.
--Editors: Young-Sam Cho, Garry Smith.
To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net.
