Case study


by Professor Ian H. Giddy
New York University

This reports on the 1999 leveraged buy-out of the Hong Kong-based semiconductor assembly company, ASAT Ltd.

November 1999
IC packaging house ASAT's restructuring of corporate ownership is now complete, with a financial investor group led by Chase Manhattan Corp's private equity arm for Asian investments recently buying a 50% stake from ASAT's loss-plagued parent, QPL International Holdings. QPL, which continues to own the remaining half of ASAT, reportedly raised more than $200 million in the transaction. A holding company incorporated in Bermuda but whose stock trades in Hong Kong, QPL agreed to sell the stake for $150 million in cash plus assumption of debt and other considerations, according to published reports. ASAT, which is profitable, is based in Hong Kong, with semiconductor packaging and assembly operations in the Far East and Europe and sales operations in the United States and elsewhere. ASAT Ltd has annual sales around $250 million worldwide. 

"We are zipping along," says Dick Brancato, president of ASAT USA, Fremont, California. "In the last few months, we have reached a run-rate of $300 million to $350 million a year. We increased capacity in Hong Kong 25% over the past few months, and over the next two quarters, we will increase capacity another 25%. Business is fantastic." Under the new ownership structure, ASAT is 50% owned by QPL and 50% owned by the financial investor group led by Chase Asia Equity Partners and consisting of Olympus Capital and Orchid Asia. TL Li, the major shareholder in QPL, becomes chairman of the new ASAT. Jerry Lee, the chief executive officer, will assume operating responsibilities at a day-to-day level.

"It's been a tremendous year," says Brancato. "The whole team has worked hard to turn ASAT around and get back to its roots of providing leading edge technology with a superior customer service quotient. There have been continuous and large investments in equipment and support infrastructure for our factories as well as our USA customer support staff. The investment ensures that we will meet our leadership target." ASAT Hong Kong is a provider of turnkey solutions in IC package design, assembly and test featuring TBGA, fpBGA, LPCC, OptiPad and other plastic packages.

The firm says it is "well-positioned to achieve strong growth. The shareholders are united in their conviction to build ASAT, over the next few years, into one of the most successful assemblers of IC packages in the world." 

The financing of the deal was done through a US$150m high-yield bond (which was going through a roadshow in October), a US$60m syndicated bank loan and equity contributions from the partners in the consortium.

Chase's Mr Weiss says that in such deals there is the first signs that the template of leveraged transactions in the US in the 1980s and 1990s, currently being repeated in Europe, is slowly taking shape in Asia as well.

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Copyright ©2005  Ian Giddy. All rights reserved.