The Shanghai Stock Exchange (SME) on Monday approved a plan by Semiconductor Manufacturing International Corporation (SMIC), the country's leading chipmaker, to acquire the remaining 49 percent stake in its subsidiary SMIC North for 40.6 billion yuan (about 5.98 billion U.S. dollars) through share issuance, marking the largest merger and acquisition deal since the inception of China's STAR Market.
The deal, approved by SME's merger and acquisition review committee, was the first case of a multi-listed red-chip company issuing shares to purchase assets on the STAR market, and it is also the largest merger and acquisition deal in the history of the domestic wafer foundry industry.
After the completion of the transaction, SMIC's stake in SMIC North will increase from 51 percent to 100 percent. The offering price is set at 74.2 yuan (10.9 U.S. dollars) per share.
"Stock acquisition is a mechanism that binds the interests of both parties and shares risks. It sends a very positive message to the outside world and saves cash. Cash is a very valuable asset for growth-oriented companies, which can use it for other places where cash is needed more badly," said Qian Jun, executive dean of the Fanhai International School of Finance (FISF) of Fudan University in Shanghai.
Experts said that the acquisition will help further improve the quality of SMIC's assets and enhance business synergy, as SMIC North is one of the most profitable single factories within the SMIC system.
"Through industry consolidation, higher-quality assets can be concentrated into the hands of listed companies that have operational and value creation capabilities," Qian said.
SMIC gains approval for acquisition of its Beijing fab
