HTC fends off Apple with S3 acquisition

S3 Graphics changes hands between group companies, as HTC Corporation buys out Via Technologies in a bid to outsmart Apple.

HTC Corporation will pay $300 million to Via Technologies to buy S3 Graphics in a related-party transaction.

HTC, which was originally known as the High Tech Computer Corporation, was founded in 1997 by Cher Wang, HT Cho and Peter Chou. Cher Wang is the daughter of Taiwan’s richest man, Wang Yung-ching, who founded the Formosa petrochemicals and plastics empire. He passed away in 2008.

HTC started life as a manufacturer of notebook computers but quickly became a pioneer in touch and wireless handheld devices. Its landmark product launches have included the Palm Treo, the iPaq and the world’s first Android phone. Wang and her affiliate investment companies currently own around 18% of HTC.

Via Technologies develops silicon chip technology. Wang herself is chairperson of Via and her husband Wen Chi Chen has been chief executive officer since 1992.

S3 Graphics makes graphics visualisation technologies used in laptops and PCs, game consoles and mobile devices. Via bought S3 in 2001 with the intention of integrating graphics with Via’s processors and chipsets. S3, which is based in California, had to be recapitalised in 2005 through an investment by finance company WTI Investment International. Cher Wang is a substantial shareholder in WTI, a private investment company.

Of the $300 million price tag, Via will receive $147 million while WTI will receive $153 million. A source said that Wang will recoup her original investment in S3 through the current deal, but will not earn any return.

The value of S3 lies in its patents, added the source, and the $300 million valuation is based on independent valuers’ assessments of the portfolio of patents. The company did not disclose which valuers were used. S3 owns around 235 patents and some pending applications. The $300 million price at which the transfer of shareholding will take place values them in the range of $1 million each. Recent deals involving patents have been done in this ballpark range, said the source.

The deal sees HTC take on around 36 employees of S3, who are mostly engineers, said the source. The chip-design team will continue to be part of Via.

HTC has been embroiled in a patent infringement dispute with Apple since last year and the acquisition is expected to strengthen HTC’s position, said analysts. Earlier this week a court found that Apple had infringed some of S3’s patents relating to image compression technology.

HTC was represented by Goldman Sachs on the deal. Via did not have an adviser.

¬ Haymarket Media Limited. All rights reserved.
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