<TABLE border=0 cellSpacing=0 cellPadding=0 width="100%"><TBODY><TR>Bacon and eggs and that Chartered sale
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->LAST Tuesday, it was reported that the independent financial adviser (IFA) has endorsed the takeover of Chartered Semiconductor Manufacturing by Atic ('Chartered bid gets nod from advisory firm'). One wonders if the deal is really in the best interests of minority shareholders.
First, the takeover price of $2.68 per share is below the current book value, estimated to be $2.80. Second, given the recovery now widely expected in the technology sector, the book value can only get higher and not lower.
As the IFA has boldly proclaimed in its recommendation, the takeover will give Chartered a much-needed boost to compete as the world's second largest chipmaker.
If that is the scenario, one wonders why Temasek Holdings should sell its entire stake. Could it not have considered being an equal partner with Atic and allow Chartered to continue to be listed? Even if it wants to get out of its 22-year-old investment, $2.68 is a poor price. Chartered's name alone and its association with Singapore should command a premium over book value. In fact, DBS Vickers Securities had placed a potential price tag of $3.50 (or 1.25 times the book value) on Chartered not long ago.
The deal brings to mind the analogy of a 'bacon and eggs' merger. The chicken said to the pig that since 'bacon and eggs' is a popular breakfast, a merger between them made sense. But then the pig is slaughtered while the chicken merely lays the eggs and prospers.
Hence, minority shareholders should carefully consider whether to vote for the deal, notwithstanding the IFA's recommendation. If we collectively vote against the deal, it should clear the way for Temasek to 'work harder' to find a better solution for the future of Chartered.
Lim Chin Siew
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->LAST Tuesday, it was reported that the independent financial adviser (IFA) has endorsed the takeover of Chartered Semiconductor Manufacturing by Atic ('Chartered bid gets nod from advisory firm'). One wonders if the deal is really in the best interests of minority shareholders.
First, the takeover price of $2.68 per share is below the current book value, estimated to be $2.80. Second, given the recovery now widely expected in the technology sector, the book value can only get higher and not lower.
As the IFA has boldly proclaimed in its recommendation, the takeover will give Chartered a much-needed boost to compete as the world's second largest chipmaker.
If that is the scenario, one wonders why Temasek Holdings should sell its entire stake. Could it not have considered being an equal partner with Atic and allow Chartered to continue to be listed? Even if it wants to get out of its 22-year-old investment, $2.68 is a poor price. Chartered's name alone and its association with Singapore should command a premium over book value. In fact, DBS Vickers Securities had placed a potential price tag of $3.50 (or 1.25 times the book value) on Chartered not long ago.
The deal brings to mind the analogy of a 'bacon and eggs' merger. The chicken said to the pig that since 'bacon and eggs' is a popular breakfast, a merger between them made sense. But then the pig is slaughtered while the chicken merely lays the eggs and prospers.
Hence, minority shareholders should carefully consider whether to vote for the deal, notwithstanding the IFA's recommendation. If we collectively vote against the deal, it should clear the way for Temasek to 'work harder' to find a better solution for the future of Chartered.
Lim Chin Siew
