Yageo Corp’s (國巨) board of directors has approved a plan to fully acquire Chilisin Electronics Corp (奇力新) in a bid to accelerate the firm’s expansion into high-margin passive component markets through improved product integration, Yageo said yesterday.The takeover would allow Yageo to provide a one-stop shopping service, and aligns with supply chain optimization efforts made by clients in the past few years, Yageo chairman Pierre Chen (陳泰銘) told a virtual media briefing yesterday. Chen is also chairman of Chilisin.
The merger would also help boost Yageo’s revenue and earnings per share, he said. Chilisin would make up 15 percent of Yageo’s total revenue after the transaction is completed, Yageo said, adding that it aims to finalize the deal on Dec. 30. Hsinchu-based Chilisin last year posted revenue of NT$17.44 billion (US$625.8 million), while Yageo posted NT$67.66 billion. Yageo, the world’s third-largest supplier of multilayer ceramic capacitors, owns about 11.5 percent of Chilisin shares. Chilisin is the world’s third-largest supplier of inductor components.
Over the past three years, Yageo has optimized its product portfolio through acquisitions of Kemet Corp and Pulse Electronics Corp, with high-margin premium products accounting for 75 percent of its revenue, Chen said, adding that these products accounted for 30 percent of revenue in 2017.
“For the first time, Yageo has the chance to have a bite of the industry’s cream of the crop, thanks to the acquisitions of Kemet and Pulse,” Chen said.
Chilisin could achieve a similar improvement by leveraging Yageo’s strength in passive component deployments and extensive sales channels worldwide, Chen said, adding that the firm could broaden its product portfolio from chip resistors and capacitors to inductors. That would also help safeguard its stability in product supply to clients and prices, he said.
Yageo’s premium products with gross margins of more than 35 percent are used in vehicles, and industrial and aeronautic devices, the firm said. About 18 percent of revenue came from passive components for vehicles, Yageo said.
Chilisin’s gross margins have come under constraints due to the firm’s significant exposures to the Chinese market with its cut-throat price competition and limited sales channel, Yageo said. Chilisin shipped more than 80 percent of its products to China, it added.
After joining Yageo, Chilisin should see revenue from premium products grow 10 to 15 percent per year, Chen said. Chilisin focuses on making inductor components for consumer electronics, mobile devices and communications applications. Both companies’ boards agreed to the acquisition through a share swap. Each Chilisin share would be exchanged for 0.2002 shares of Yageo, the firms said in a joint statement. The offering represented a premium of 10 percent based on Chilisin’s closing price of NT$101 on Tuesday. Chilisin would become a subsidiary of Yageo and be delisted from the local stock market.