MediaTek Inc. (2454)’s China head resigned as Taiwan authorities probed possible insider trading linked to the company’s planned $3.8 billion merger with MStar Semiconductor Inc. (3697)
Lu Hsiang-cheng is being investigated for insider trading along with four other people and posted NT$1 million ($34,000) in bail, Taipei Deputy Chief Prosecutor Huang Mou-hsin said May 3. Lu quit for personal reasons, MediaTek Chief Financial Officer David Ku said by phone. He declined to comment on the former official’s “personal conduct.”
Shares of the Hsinchu-based chipmakers have surged more than 30 percent since MediaTek announced the merger agreement June 22, compared with a 13 percent increase in the Taiwan Stock Exchange index. The deal would be the fifth-largest semiconductor acquisition globally in the past decade. The companies, which together make 70 percent of the chips used in televisions, face stagnating global demand for TV sets.
Both companies climbed 1.1 percent in Taipei on June 22 before the merger was announced. Huang declined to give a timeframe for when suspicious trading occurred. Mediatek advanced 0.1 percent to NT$366.5 on May 3 and MStar gained 0.4 percent to NT$251.5. The Taiwan Stock Exchange index rose 0.1 percent.
Mediatek and MStar gave documents to authorities on May 2, they said in separate stock exchange statements. The investigations relate to the actions of individuals and not to the companies’ operations, they said. MStar turned over shareholder information and trading records and MediaTek provided materials to investigators looking into the planned deal, they said.
MStar shareholders would get 0.794 of a new MediaTek share plus NT$1 in cash for each stock held, a 20 percent premium to the closing price on the day of the announcement, the companies said at the time.
Regulatory delays have raised the price of the deal, Ku said last month, without quantifying the cost. Mainland China’s antitrust regulator remains the final hurdle after Taiwan and South Korea authorities gave their approvals.
Insider trading is punishable by as long as 10 years in prison under Taiwan law. In separate cases, executives of Inventec Appliances Corp. and AU Optronics Corp. (2409) have been acquitted of the offense.
MediaTek named Aaron Chang as its new head of China operations, it said in a May 3 stock exchange filing.
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