Bloomberg News

Taiwan Regulator Rejects KKR-Backed Buyout Offer for Yageo

June 22, 2011

(Updates with regulator comment in second paragraph.)

June 22 (Bloomberg) -- Taiwan rejected a NT$46.8 billion ($1.6 billion) KKR & Co.-backed takeover of electronic-parts maker Yageo Corp., the second major cross-border deal turned down by regulators in the past year.

“The investor didn’t clear up doubts regulators had about shareholder and investor protections, whether the offer price is reasonable, and level of transparency of information disclosure,” Fan Liang-tung, executive secretary of the economic ministry’s investment commission said today. The KKR- backed group can appeal within 30 days. Orion Investment Co., a venture between New York-based KKR and Yageo founder Pierre Chen, announced a management-led buyout of the company in April.

Taiwan’s rejection is a blow to Chen’s plans to get control of the company he founded 34 years ago and take it private. The regulator also rejected a $2.15 billion bid for Nan Shan Life Insurance Co. led by Hong Kong-based Primus Financial Holdings Ltd. last year, saying the group had failed to show it had the financial capability and long-term commitment to operate the venture.

Fan declined to say if raising the offer price of NT$16.10 per share would help the purchase of Yageo get approved. The commission also had doubts about how Orion would benefit from the transaction and about the weakened capital structure of the surviving entity because it was highly leveraged, Fan said.

Susannah Geary from Kreab Gavin Anderson, the public relations company representing KKR, and Jacky Chen, a spokesman for Yageo, declined to comment.

Carlyle’s Deal

The Carlyle Group’s NT$47.6 billion buyout of Taiwan-based cable operator Kbro Co. won Investment Commission approval in 2006, according to Bloomberg data. Carlyle this year received permission to sell Kbro to a Taiwanese group.

Yageo’s stock dropped 1.4 percent to NT$13.70 at the 1:30 p.m. close of trade today in Taipei before the announcement, the lowest level since December. The shares have lost 2.8 percent since the closing price prior to the April 6 announcement of the bid, compared with a 1 percent drop in the benchmark Taiex.

The bid received support from shareholders who would represent 60 percent of the fully diluted stock after taking into account the shares issuable upon conversion of euro convertible bonds, Yageo said May 23.

Orion’s Bid

Orion’s bid, to be funded by an NT$28 billion loan, follows KKR’s 2007 investment in Taipei-based Yageo through a convertible bond purchase. That deal led the Taiwanese company to appoint Chief Financial Officer Dora Chang and recruit Masayuki Fujimoto from Japan’s Taiyo Yuden Co. as chief technology officer.

UBS AG and Nomura International Plc had given commitments to provide the loans, Orion said in the prospectus dated May 5. Chen and his family would own 55 percent of Yageo after the deal closed, it said in April.

Orion had extended the tender offer to June 24 to allow more time for regulators to review the deal, it said in the May 23 statement.

--With assistance from Janet Ong in Taipei and Anand Krishnamoorthy in Singapore. Editors: Suresh Seshadri, Dave McCombs

To contact the reporters on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net; Chinmei Sung in Taipei at csung4@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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