Unisem buying Batam-based AIT

Unisem buying Batam-based AIT

By Yeow Pooi Ling

KUALA LUMPUR: Chipmaker Unisem Bhd has proposed to buy Advanced Interconnect Technologies Ltd (AIT) for US$70.25mil cash, said chairman and managing director John Chia Sin Tet.


John Chia at the press briefing yesterday.
About a third of the sum will be financed with internal funds and the balance with borrowings. Unisem will also assume net debts of US$6.6mil on completion of the deal.

Chia told a press briefing on the proposal yesterday that since the group had spent only “a fraction” of the RM400mil it raised last year, it could easily use the balance funds. Post-acquisition, the group's gearing would rise to 0.89 from 0.65 time at Dec 31, 2006.

“This deal will transform the group into one of the top 10 semiconductor assembly and test service providers in the world by revenue,” Chia said, adding that the purchase was anticipated to be accretive this year.

AIT, whose main operations are in Batam, Indonesia, provides a full range of package testing and offers fully integrated turnkey services. Its key products include both array and leadframe packages.

For the financial year ended Dec 31, 2006 it made a net profit of US$8.8mil on revenue of US$133.4mil.

For the same fiscal year, Unisem made a net profit of almost RM72mil on sales of RM692.8mil.

The investment was anticipated to break even in four years.

Post-acquisition, the group's revenue base will be widened by its bigger presence in the motor vehicle sector, a higher proportion of revenue from Europe to 29% from 22% previously, and reduced exposure to the US market to 62% from 64% before, as well as from a better product mix.

“AIT's customer base is highly complementary to Unisem's with minimal overlap,” Chia said, adding that there would be cross-selling opportunities, cost savings and technology leverage.

Moreover, he said, the AIT management had agreed to stay in the group, bringing with them significant assembly and test experience.

He also noted that AIT had been performing positively in the past three years with “minimal” capital expenditure (capex).

“Capex going forward mainly would be for maintenance rather than for expansion as AIT's facilities in Batam as well as Unisem's in Ipoh are operating at almost full capacity,” he said.

Expansion would mainly be centred on the group's operations in Chengdu, China, he added.

Unisem's China unit, which owns the packaging and test facility, is expected to break even in the second half this year.

“We have invested about US$40mil in China, of which the bulk is for setting up the plant and the balance for machinery and working capital,” Chia said.

Additional capex would be to buy more equipment to generate immediate revenue but “this depends on how the business develops,” he said.

Unisem executive director Francis Chia Mong Tet said AIT was expected to grow in “low teens” and would contribute between 15% and 20% to Unisem's net profit going forward