AUO, Chi Mei open to merger proposals from rivals

By Kevin Chen
STAFF REPORTER, WITH BLOOMBERG
Friday, Dec 26, 2008, Page 12

AU Optronics Corp (AUO, 友達光電) and Chi Mei Optoelectronics Corp (奇美電子), on course to post record losses, said they are open to mergers with rival liquid-crystal-display makers to restore profitability.

AU Optronics, Taiwan’s largest LCD maker, will consider all proposals beneficial to shareholders, spokeswoman Hsiao Ya-wen (蕭雅文) said by telephone yesterday.

Hsiao said AU Optronics doesn’t have an acquisition target at present, after the company bought Quanta Display Inc (廣輝電子) in 2006.

On Wednesday, Chi Mei said in a statement that the company maintains an open-minded attitude towards the industry consolidation issue. But the Tainan-based firm stressed that it does not have any specific merger and acquisition plans at the moment.

“The government will support continued development of the panel industry and will do its best to assist companies to overcome the difficulties they now face,” Premier Liu Chao-shiuan (劉兆玄) told the Chinese-language USTV cable television station yesterday after meeting Chi Mei founder Hsu Wen-long (許文龍) in Tainan.

The meeting came after Hsu said in an interview with the Chinese-language Business Weekly (商業周刊) magazine to be released on Monday that he is willing to hand Chi Mei over to those who “are richer and more capable” than him.

Meanwhile, the Chinese-language Economic Daily News reported yesterday that executives at AU Optronics and Chi Mei visited Minister of Economic Affairs Yiin Chii-ming (尹啟銘) on Wednesday to discuss government assistance and industry consolidation.

The remark by Hsu, along with the newspaper report about the secret meeting at the Ministry of Economic Affairs, triggered market speculation about a merger of the nation’s top two flat-panel makers as companies find ways to ride out the current industry downturn amid mounting losses.

In the third quarter, AU Optronics reported a 96 percent year-on-year drop in net profit to NT$860 million and Chi Mei posted losses of NT$4.19 billion, the companies said in October.

However, the ministry yesterday denied that Yiin had met executives of either firm on Wednesday to discuss mergers and acquisitions, an official from the ministry said, who preferred to remain anonymous.

Apparently, in a move to further downplay its founder’s idea of mergers and acquisitions, Chi Mei president Ho Jau-yang (何昭陽) yesterday told the same cable television station that there are other avenues of “mutual collaboration” that the flat-panel display industry could use “to increase competitiveness” beside industry consolidation.

Analysts believed a merger between AU Optronics and Chi Mei was easy to talk about but not so easy to implement, given the two companies’ different corporate cultures and management strategies. SinoPac Securities Corp (永豐金證券) said it maintained “sell” ratings on AU Optronics and Chi Mei, with target prices of NT$15 and NT$7.5, respectively, a client note said yesterday.

In Taipei trading yesterday, shares of AU Optronics fell 0.45 percent to close at NT$22, while those of Chi Mei dropped 2.44 percent to NT$10. So far this year, AU Optronics shares have declined 65.4 percent and Chi Mei shares, 78 percent, Taiwan Stock Exchange data showed.

As for other flat-panel makers, Chunghwa Picture Tubes Ltd (華映) welcomed government measures to boost competitiveness, while Hannstar Display Corp (瀚宇彩晶) was open to consolidation, officials from the two companies said.