Yageo take-private deal values firm at $1.6 billion

Yageo founder Pierre Chen and KKR launch a deal to delist the Taiwanese electronic component maker, citing the need for greater financial flexibility.
Yageo's manufacturing base in Kaohsiung, Taiwan
Yageo's manufacturing base in Kaohsiung, Taiwan

Yageo founder Pierre Chen, backed by private equity firm Kohlberg Kravis Roberts (KKR), yesterday launched an offer to take Yageo private at a price that values the company at NT$47 billion ($1.6 billion).

Orion Investment Company, the vehicle created to undertake the deal, is offering NT$16.10 per share for all Yageo’s outstanding minority shares. Orion is owned jointly by Chen, who founded Yageo and is currently chairman and chief executive officer, and KKR.

The offer price represents a premium of about 14% over the last closing price of Yageo shares on the Taiwan Stock Exchange, and is equal to the highest closing price the stock has reached since July 2004.

Yageo is an electronic components manufacturer that went public in 1993 and has been in business since 1977. In June 2007, KKR bought $230 million of convertible bonds in Yageo with a conversion price of NT$16.15 per share. The conversion price represented an 11.5% premium to the three-day average trading price prior to signing. Assuming the CBs were fully converted, KKR would have owned 16.1% of Yageo. At the time, Chen said the investment by the private equity firm was intended to provide long-term capital to support Yageo’s growth as well as to allow the company to benefit from KKR’s extensive global resources and world-class management expertise.

Now, Chen, his family and KKR own around 34.3% of Yageo, following the conversion of KKR convertible bonds and the exercising of all employee stock options. If the take-private is successful, Chen and his family will own around 55% of Yageo and KKR will own the balance, said a source.

“From a long-term perspective, the new shareholding structure will enable investments in accelerated high-end product development and deeper penetration into Western markets, which will complete our transformation into a global leader across our focus products,” said Chen in a press release issued by Yageo yesterday.

Yageo now has production and sales facilities in Asia, Europe and the Americas, although it remains headquartered in Taipei. It has transformed itself during the past few years from a company earning around half its revenues domestically, to a business that now derives around two-thirds of its revenues from China. In the same release, Chen stressed that Yageo will remain based in Taiwan and KKR partner Julian Wolhardt said that KKR was excited to be investing in Taiwan and contributing to the growth of the Taiwanese economy.

UBS is financial adviser to Orion with Paul, Weiss, Rifkind, Wharton & Garrison, Baker & McKenzie and Simpson Thacher & Bartlett providing legal advice. UBS had no comment.

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