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UPDATE 2-Taiwan's ChipMOS scraps share sale plan to China Unigroup on regulatory uncertainty
November 30, 2016 / 7:20 AM / 10 months ago

UPDATE 2-Taiwan's ChipMOS scraps share sale plan to China Unigroup on regulatory uncertainty

* Planned stake sale worth $373 mln was unveiled a year ago

* Share scrapping is 2nd of 3 Unigroup deals to fail in Taiwan

* Came as new government less friendly to China took power

* Fate of Powertech’s deal with Unigroup unclear (Adds comments from ChipMOS executives, more deal details)

By J.R. Wu

TAIPEI, Nov 30 (Reuters) - Taiwan’s ChipMOS Technologies said it scrapped a planned $373 million stake sale to China’s Tsinghua Unigroup due to uncertainty about Taiwanese regulatory clearance, the second deal in eight months involving Unigroup and a firm in the island to fall through.

Instead, the chip test and packaging company will sell a 54.98 percent stake in its Shanghai operations to the Chinese conglomerate and related strategic investors for 498 million yuan ($72.36 million) to expand its production and business in China, ChipMOS said on Wednesday.

The share sale, announced a year ago, was spiked due to political considerations, industry analysts said, as it was put under intense scrutiny when the independence-leaning Democratic Progressive Party (DPP) came to power this year. The DPP is traditionally less friendly toward China.

Shortly after Taiwan President and DPP leader Tsai Ing-wen took office in May, China cut off official communication with Taipei because she has refused to accept China’s view that the self-ruled island is a part of China, and ties between the two sides since she won the presidential election in January have been fraying.

China deems Taiwan a wayward province to be taken back by force if necessary. Taiwan has protected its prized chip industry from becoming too reliant and open to China.

Tsinghua Unigroup’s investment plans were going to have to go through unprecedented parliamentary review in Taiwan, but had not yet been put on lawmakers’ agenda.

ChipMOS executives said their efforts to communicate with regulators to get the deal through were unsuccessful due to the overall environment, without providing specifics, and that revising the deal was imperative for ChipMOS’ future.

“For the back-end testing and packaging, China has the best potential customers,” ChipMOS chairman S.J. Cheng told reporters at a news briefing. “For our company’s operations and long-term development, going to China to set up and expand production and capture orders is a sure trend, otherwise you will be marginalized.”

He said the new deal terms - in which a ChipMOS unit that wholly-owns ChipMOS Technologies (Shanghai) Ltd is selling its stake to Tsinghua Unigroup - will need to be approved by Taiwanese investment authorities.

The termination of the original share sale that would have given Tsinghua Unigroup a quarter stake in the parent ChipMOS comes after a similar deal that was announced last year with Siliconware Precision Industries Co (SPIL), and due to shareholder opposition, was subsequently abandoned.

A quarter stake purchase in Powertech Technology Inc , another Taiwanese chip tester and packager, is still pending with regulators after being first announced in October 2015.

Unigroup Guoxin Co Ltd, the Tsinghua Unigroup entity involved in the Taiwanese deals, said Wednesday the deal with ChipMOS was terminated, after warning last week that the tie-ups it struck with ChipMOS and Powertech could fall through due to prolonged regulatory review in Taiwan.

$1 = 31.8630 Taiwan dollars $1 = 6.8821 Chinese yuan renminbi Reporting by J.R. Wu; Editing by Muralikumar Anantharaman

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