Philips sells $1.1bn chip stake
TAIPEI, Taiwan (Reuters) -- Philips Electronics NV said on Tuesday it sold a US$1.1 billion stake in top contract microchip maker TSMC, reducing its debt by almost a fifth as it tries to revamp its struggling consumer electronics unit.
The deal cuts Philips' stake in TSMC, the world's largest contract microchip maker, to 19.1 percent from 21.5 percent, removing a shadow hanging over TSMC's shares. Philips will book a US$800 million profit on the previously flagged sale.
Philips remains TSMC's largest shareholder after the deal, and said it expected to be among the Taiwan firm's biggest shareholders in the foreseeable future. The two companies are strategic partners in areas such as research and development.
Philips provided start-up funds for TSMC, which was founded in 1987, owning as much as 51 percent before share sales and dilution from new stock issues whittled the stake lower.
TSMC has ridden the growth of chipmakers globally in the last decade and its market value of US$41.2 billion now exceeds the US$36.6 billion for Philips, which has struggled to compete with lower-cost Asian consumer electronics firms.
Netherlands-based Philips sold 100 million ADSs in Taiwan Semiconductor Manufacturing Co to fund managers in the open market at US$10.77 per share, matching the issue's U.S. closing price after a 5.69 percent drop in Wall Street trade on Monday.
Philips, which said it made gross proceeds of 935 million euros (US$1.10 billion) from the sale, has said it plans to continue making a "gradual and orderly reduction" in its holding.
It said it would book a non-taxable gain of 700 million euros from the sale in the fourth quarter.
The Dutch electronics group has said it plans to use the proceeds to reduce debt, which stood at some 5.4 billion euros at the end of the second quarter. It said earlier this month it would overhaul its consumer electronics division and take 250 million euros of charges in order to cut costs.
SELLING PRESSURE SLACKENS
Besides Philips, the Taiwan government sold about 79 million TSMC ADSs at a discount of 0.67 percent in July, raising some US$822 million to shore up a budget deficit.
"I think everyone's attitude toward TSMC is quite positive right now. Philips is unlikely to sell again very soon, and in terms of fundamentals they are supposed to be even better next year," said ABN-AMRO fund manager Jim Chang.
"There is no panic selling in the market today and given TSMC's fall on Wall Street, today's loss is very normal," said Chang, who manages the US$18 million Kwang Hwa fund in Taipei.
TSMC shares fell T$2.00 to end down 2.94 percent at T$66.00 in Taiwan trade on Tuesday, reflecting the issue's losses in U.S. trade.
Merrill Lynch and Goldman Sachs were joint lead managers on the offer. TSMC said the issue hiked its proportion of ADSs to about 14.5 percent of total share capital, up from 12 percent. One ADS is equal to five of TSMC's Taiwan-listed ordinary shares.
TSMC set record monthly sales in the last three consecutive months, powered by resurgent consumer demand for gadgets such as picture-snapping mobile phones as the semiconductor industry recovers from its worst revenue drop on record in 2001.
TSMC shares have risen 66 percent this year to outperform a 35 percent gain in the local TAIEX share index, but the company's gains and its strong liquidity have made it a cash generator for major shareholders seeking to shore up finances.
The company's U.S. shares traded at about a 15 percent premium to its Taiwan stock in September, and the gap has steadily shrunk from around 60 percent in 2000 as Taiwan removes barriers to foreign investment in its stock market.
Taiwan's government, which owns some nine percent of the company, plans to sell some US$1.3 billion in stocks next year, and TSMC shares have made up some 90 percent of the government's sales in previous years.
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