Carlyle in Talks to Buy Chip Company

Jason Chang, chairman of Advanced Semiconductor. (Alan Patterson - Bloomberg News)

Carlyle Group of the District is in talks to buy Advanced Semiconductor Engineering, the world's largest computer chip packager, for $5.7 billion, as demand for computer and mobile-phone components increases.

Carlyle and Advanced Semiconductors Chairman Jason Chang, who holds 18.4 percent of the Taiwan company, offered to pay 9.9 percent more than the company's closing price yesterday in Taipei, Carlyle said in a written statement. Carlyle said talks with the group have not concluded and a formal offer may not be made.

Carlyle's proposed purchase would add to recent acquisitions the firm has made in the semiconductor business. In September, it was part of a group that agreed to buy Freescale Semiconductor for $17.6 billion, in the biggest technology buyout ever. Global chip sales could increase 9.4 percent this year, the Semiconductor Industry Association said.

"The outlook for the electronics industry is good, as the introduction of Microsoft's Vista should boost demand for PCs," said Michael On, who oversees the equivalent of $60 million as managing director at Beyond Asset Management in Taipei.

The spot price of benchmark 512-megabyte memory chips, used in personal computers and other devices, has risen 62 percent this year, according to Dramexchange.com in Taiwan.

Advanced Semiconductor, which was founded in 1984, packages chips in plastic or ceramic housings and adds connectors so they can be assembled as part of computers, game consoles, cellphones and other electronic instruments. The company employs more than 30,000 people.

Advanced Semiconductor confirmed the Carlyle offer and Chang's participation in the bid.

"We have received the indication of the offer from Carlyle, and our chairman has agreed with the offer," spokesman Freddie Liu said in a telephone interview yesterday. "We still need to seek approval from other shareholders."

Liu declined to comment on whether the company's vice chairman and president, Richard Chang, who helped found the company with his brother Jason, would also participate in the bid.

The company's shares rose 2.6 percent before the announcement, which came after the close of trading. The offer represents a 23.5 percent premium on the stock's 30-day average closing price, Carlyle said.

Goldman Sachs Group is advising Carlyle on the takeover bid. Carlyle has been investing in Taiwan since 1999, the company said.

Advanced Semiconductor could "take advantage of accelerating global outsourcing trends for semiconductor assembly and testing services," said Greg Zeluck, Carlyle's managing director. The firm could also tap the "global networks of Carlyle and its portfolio companies."

Buyout firms have announced offers totaling $57 billion in the Asia Pacific region this year, more than triple the amount for all of 2005, according to data compiled by Bloomberg News.

Carlyle said in July that it raised $1.8 billion for its second Asia buyout fund, which will focus on investment in Asia outside of Japan. That would make $4.8 billion it has attracted for investment in the region in the past year, including its second Japan fund.