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September 25, 2017

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Hon Hai finalizes bid to acquire Asia Pacific Telecom

TAIPEI, Taiwan -- Hon Hai Precision Industry Co. (鴻海) yesterday finalized its bid to acquire Asia Pacific Telecom (APT, 亞太) with an NT$11.7 billion purchase of new shares.

Ambit Microsystems (國碁電子), a wholly owned subsidiary owned by Hon Hai, will subscribe to a 70-percent portion, or 582 million shares out of the 826.4 million shares issued by APT in a private placement at NT$20 per share, a 14.7-percent premium over the minimum subscription price of NT$17.44.

Reports indicate that Ambit has plans to form a strategic alliance with an international partner, who will acquire the remaining 30 percent of shares issued in the private placement.

Following the exchange of shares, the two companies will finalize the acquisition process with regulators including the National Communication Commission, rendering Ambit the merged company to be dissolved, and APT the surviving company. Ambit, however, will need to produce a viable international partner to take on the remaining 30 percent, or 248 million shares of the private placement, before APT's shareholders' conference scheduled for June 20 next year. Industry commentators last week stated that based on Hon Hai Chairman Terry Gou's close personal ties with SoftBank CEO Masayoshi Son (孫正義), it is likely that the Japanese company is on the company's list of candidates as an strategic partner in the pursuit to establish Taiwan's fourth-generation (4G) mobile broadband network.

Hon Hai Vies to Take Majority Stake from Gov't Affiliates

Most notably, Hon Hai is poised to hold a 14-percent stake in APT, making it the majority shareholder. Following the deal Hon Hai will displace the Taiwan Railway Administration (TRA, 台鐵) as APT's largest shareholder, whose ownership of APT will decline from 12 percent to 9.67 percent.

Meanwhile, reports indicate that Hon Hai intends to acquire APT shares currently held by a number of state-run companies and government affiliates. If Hon Hai successfully gathers up the 9.67 percent held by the TRA, the company will edge closer to the goal of taking the position as the majority APT shareholder with a stake greater than 30 percent.

Spurred by news of its acquisition, APT shares yesterday gained NT$0.20, or 5.88 percent, to close at NT$18.05. Hon Hai shares yesterday gained NT$0.3, or 0.32 percent, to close at NT$92.8.

Having been bested by Hon Hai in the contest to acquire APT, Taiwan Star Cellular Co. (台灣之星), a subsidiary backed by the Ting Hsin International Group (頂新), yesterday stated that its 4G plans will proceed despite the setback.

A Taishin Securities Investment Advisory analyst yesterday stated that while it is difficult to gauge whether Hon Hai had overpaid to acquire APT, the company's existing subscribership and voice and data transmission capabilities of its 3G network infrastructure will greatly aid Hon Hai's 4G ambitions.

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