LONDON – Tsingua Unigroup Ltd., a subsidiary of a Chinese state-owned holding company, has offered $1.38 billion in cash to buy mobile phone chip company Spreadtrum Communications Inc. (Shanghai, China).
Spreadtrum, the leading fabless semiconductor provider based in China, offers chips for 2G, 3G and 4G wireless communications and is publicly owned with its shares are traded on the Nasdaq exchange.
Unigroup is an operating subsidiary of Tsinghua Holdings Co. Ltd., a solely state-owned company funded by Tsinghua University, one of the leading universities in China. The offer, of $28.50 per American Depository Share, was announced on Friday June 21 and represented a 20 percent premium over the June 19 closing stock price of $23.73. The offer also came shortly after Spreadtrum announced a big jump in its guidance for second quarter sales (see Smartphone demand makes Spreadtrum guidance soar).
"We are enthusiastic about Spreadtrum's business and market position globally and here in China, and we see Spreadtrum as an excellent strategic fit with Unigroup's overall commercial objectives," said Zhao Weiguo, chairman and CEO of Unigroup, in a statement.
Tsinghua Holding has built up a portfolio of subsidiary companies operating in information technology, energy conservation and environmental protection, life science and technical services. It's information technology business focuses on personal computers and peripherals, information systems, the Internet and its application, IC chip design and manufacturing processes, digital TV technology and transmission equipment. At the end of 2012 Tsinghua Holdings had total assets of approximately 70.4 billion RMB (about $11.5 billion) and net income in the 2012 fiscal year of 1.45 billion RMB (about $250 million).
The Unigroup proposal is non-binding and is subject to satisfactory due diligence with respect to Spreadtrum and the execution of acceptable definitive agreements, the company said. Tsinghua Holdings said that aggregate purchase price may be funded by a combination of equity and debt financing.
I am surprised to see that Spreadtrum has quite a good profit margin. Was thinking they are running on super thin margins by driving the costs downhill. Seems like there's not much competition at the low end these days.
I find the purchase interesting in that it is in the wireless arena, but I was wondering how this fits into the bigger picture. What is the intel on Unigroup and their product line? I was wondering how this acquisition fits into their product offerings or plans. Does anyone have the background on the company to add?
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