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May 30, 2017

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International brokerages buoyed by Epistar's taking over of Forepi

Foreign brokerages including J.P. Morgan Chase on Tuesday cheered for Epistar Corp.'s (晶元光電) consolidation of Formosa Epitaxy Inc. (Forepi, 璨圓光電), with Epistar hitting new highs this year.

Epistar shares yesterday soared NT$3.6, or 4.86 percent, to this year's new high of NT$77.6, while Forepi closed up NT$1.25, or 6.85 percent, to NT$6.85.

The Central News Agency (CNA) reported that the buying showed that investors were impressed by Epistar's offer, which represents a more than 17-percent premium over Forepi's closing price on Monday.

Economic Daily cited sources to report that the market widely considered it a reasonable deal given that Epistar's industry status will be improved substantially.

United Evening News said that Epistar currently ranks as the world's largest aluminium gallium indium phosphide (AlGalnP) epitaxial wafer and chip supplier and the second largest indium gallium nitride (InGaN) epitaxial wafer and chip maker.

After the acquisition, Epistar will become the biggest vendor of both LED products and will have a 30-40 percent share of the global LED epitaxial wafer and chip market.

The acquisition proposal is pending the approval of shareholders of the two companies and is scheduled to be completed Dec. 30. After the acquisition, Forepi will remain an independent company but will be de-listed from the main board, according to Economic Daily News.

CLSA said that the acquisition is expected to help Epistar's battle against China's Sanan Optoelectronics Corp. (三安光電)

J.P. Morgan Chase spoke highly of the consolidation because Epistar's current monthly capacity, added to the additional 350,000 pieces of 2-inch equivalent epitaxial wafers from Forepi, will increase to 1.3 million pieces of 2-inch equivalent wafers per month. JPMorgan Chase estimated that the expansion will substantially enable Epistar to meet customers' demand in the latter half of this year.

"It was no surprise that investors were happy with the acquisition price Epistar is offering and pushed up Forepi's shares sharply soon after the local bourse opened," Taishin Securities Investment Advisory analyst Tony Huang told CNA.

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