Epistar Corp (Taiwan’s largest manufacturer of LED epiwafers and chips) is to issue 174.612 million new shares (worth NT$10 each, totalling NT$1746.12m) to acquire fellow Taiwanese LED epiwafer and chip maker Formosa Epitaxy Inc through a stock swap of 1 Epistar share for 3.448 Formosa Epitaxy shares (to be completed by end-December 2014, pending approval of shareholders of the two firms).
With 385 metal-organic chemical vapour deposition (MOCVD) systems, 1500 R&D engineers and 2600 patents, Epistar is specifically the world's largest manufacturer of aluminium gallium indium phosphide (AlGalnP) epiwafers and chips and second largest of indium gallium nitride (InGaN) epiwafers and chips. It has fully utilized its monthly production capacity of 950,000 LED epiwafers but capacity is still short of demand by more than 300,000 wafers, according to president M.J. Chou. However, expansion entails investment and takes time. Instead, Epistar has sought existing external production capacity to fill the gap, Chou indicated.
With about 400 R&D staff, 400 patents and 103 MOCVD systems giving it a monthly production capacity of more than 200,000 AlGalnP and InGaN LED epiwafers, Formosa Epitaxy was deemed to be the best candidate, following a 6 month search for potential acquisitions (including companies in Taiwan and in China).
The acquisition of Formosa Epitaxy enables the integration of both companies’ resources to enlarge operational scale, to lower overall management cost, and to increase overall operational efficiency and international competitiveness, Chou reckons.
While still suffering an operating loss, Formosa Epitaxy hopes that merging with Epistar can reduce production costs and increase average selling price, enabling the operation to enter profitability as soon as third-quarter 2014, comments Formosa Epitaxy’s chairman Frank Chien. After the acquisition, Formosa Epitaxy will remain an independent entity.
