Powerchip raises $330 million from second GDR

The deal fetches strong demand despite being the second GDR from the memory-chip maker in five months. Local share price rallies 4.4% after the sale.
Taiwanese memory-chip maker Powerchip Semiconductor has raised $330 million from the sale of GDRs to international investors through joint bookrunners Goldman Sachs and Nomura.

It was the companyÆs second foray into the international capital markets this year after it raised $303 million from a combined sale of GDRs and convertible bonds through Deutsche Bank in June. Like last time, the timing of the sale was well chosen to coincide with a positive news flow and favourable sentiment for the sector as a whole. It also followed a 44% improvement in the companyÆs third quarter net profit.

And when the management could demonstrate a clear investment need for the money û the construction of a new 12-inch fabrication plant, or fab, in Taiwan û investors pushed aside any potential concerns about the frequency of the companyÆs capital raisings and put in their orders.

After a mere two hours of bookbuilding late Monday, the offer was about four times covered with well over 100 participating investors. According to a source, the order book contained a good number of tier-1 investors, with a fairly even distribution between long-only funds and hedge funds.

However, some price sensitivity resulted in the price being fixed at a 6% discount to the close of the underlying common shares in Taipei on Monday after being offered in a range between 4% and 9%.

The discount was slightly larger than the 4% achieved on the $168 million worth of GDRs it sold in June when the offer was priced below the indicated discount range of 5% to 10%. However, since that sale the share price has moved up from NT$19.60 to MondayÆs close of NT$20.60.

The 6% discount meant the 56.36 million GDRs that were sold late Monday fetched a price of $5.85 apiece, which is equivalent to NT$19.17. Each GDR accounts for 10 common shares. The sale represented 8.7% of the existing share capital.

About 70% of the offer was sold to Asian investors, while 16% went to US accounts and 14% to Europe.

The share offer, which has been known to the market for a while, was launched after Samsung projected very strong orders for memory chips in the first quarter, underpinned by a pickup in demand due to the launch of MicrosoftÆs new Vista operating system in January. This should benefit Powerchip, which is the largest manufacturer of memory chips in Taiwan by revenue.

Also on the positive side, a Taiwan government official said over the weekend that the government is considering lifting its ban on semiconductor companies producing chips in Mainland China. According to news reports, Powerchip and ProMOS could be given approval to set up an 8-inch fab each in China before the end of this year.

The June sale was timed to follow a heavily oversubscribed share sale by Hynix Semiconductor, which helped boost sentiment for the entire sector.

PowerchipÆs share price rallied 4.4% yesterday in the wake of the share sale to NT$21.30.
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