Tuesday, September 08, 2009

Chartered Semicon SOLD!

I'm glad Temasek has finally decided to sell this perpetually bleeding company. However, the headlines on Straits Times about Abu Dhabi offering $5.6B is puzzling. I first read about the Abu Dhabi's offer yesterday and the newsflash was Abu Dhabi buying Chartered Semiconductor for US$1.8B[Link] that is roughly S$2.5B. So how to explain the discrepancy? If you read the Straits Times article, you will realise they totaled up Chartered massive debt of S$3.1B and Abu Dhabi's offer price of S$2.5B to get $5.6B. I don't ever remember reading a financial article which presents a takeover offer price that included the company's debt. The article makes no mention of Temasek losses and how much Temasek has pumped into the company to keep it a float - each of the 5 semiconductor fab (plant) costs $2B to $4B to build. Chartered Semicon was always playing catchup with the Taiwanese players. TSMC and UMC.

40 comments:

Azz said...

If Temasek is selling something, then there's a very good chance that it will double in value soon (the inverse is true as well). Maybe it's time to buy Chartered shares! LOL

Anonymous said...

To Azz:

I second that...

Anonymous said...

Not only Temasek has been a flop in all these years, the performance of the Goverment Investment company (GIC) is also second to none. Think of the loss mad in Suzhou...thanks to Lee Kuan Yew and his family!

hansolo said...

It's OK to include the debt amount they are taking over as $5.6b is the total amount of money they are coughing up.

Anonymous said...

to anon 9.42, it's NOT ok to include the debt because you don't necessarily need to cough up the amount to pay off the debt.

kindly refer to reputable sources eg. financial times, you will see that only USD 1.8 billion is referred to.

as for the 154th, same old story. either incompetent journalists or editorial bias.

chartered semiconductor is bleeding singaporeans' money right from day one. be prepared for an article to white wash this fiasco, just like how suzhou had been.

Anonymous said...

To hansolo,

It is NOT ok to include the debts.

1) Buyers do not have to cough up cash to pay the debt, it's normally pay over a long period of time using money generated from future income.

2) and if company cannot sustain, debt can just be defaulted.

Only unethical jounalist will cook up something like this.

Sylvester Lim said...

Since Chartered Semiconductor was started (thank you Ho Ching), how much of tax payer's money was bled to date?

Wang said...

Lucky

It depends on whether the company takeover also assumes the guarantees of the debts of CSM due to bankers hence cashflow wise would be higher. The real net cashflow or NTA is the lower amount.

Thien Rong said...

If they include debt, they should also subtract the cash holding. That will become the Enterprise Value (EV) of the company.

Anonymous said...

On one hand is happy that Chartered's agony of losing taxpayer $$ is coming to an end...On the other hand feeling sad as why home grown company can't compete in international arena after pumping billions and billions of $$$ and hring tons of FT...in the end still sell at a GSS price..

LuckySingaporean said...

Thien Rong,

Straits Times is not very consistent. When the Malaysians sold Agusta, they happily reported that it was sold for 1 euro ...but the takeover company was also assuming hundreds of millions of debt.

Anonymous said...

So many comments, so little facts. Didnt any of you read the reports? A good portion of the debt is convertible to equity. If the offer price is above the strike price of the convertible debt, then obviously ATIC must pay.

BTW, I think the govt already made back the seed money when they IPO the company at the height of the dotcom boom.

Sigh...

Anonymous said...

The book value of CSM is Assets - Liabilities.

When the buyers offer $2.68 per share, they are trying to buy over the company as a going concern.

That includes BOTH the ASSETS as well as the LIABILITIES (debt) of CSM.

It is not correct to include the existing debt into the purchase consideration, unless the company's assets is valued at 0 or negative.

Anonymous said...

They would include the debt if Temasek had actually loaned Chartered S$3.1B. In that case will the S$3.1B debt be repaid? If not, will Temasek still be exposed to CSM if after they have sold it? Either ST has to correct the error or Temasek should set the record straight.

Spin said...

Just checked out the latest CSM quarterly balance sheet from Reuters (all quoted in USD)...
Total current asset = 1.25 Mil
Total asset = 4.12 Mil
Total current liabilities = 0.49 Mil
Total liabilities = 2.24 Mil

Seems to me that our Paper includes the Total liabilities into the final acquisition figures. If they really have to do that, they should at least deduct off the total current assets from the final figures.
All of us are in for another spin yet again.

Wang said...

Lucky

For Augusta, the company takeover was clear of guarantees as the new company refused to take over financial debts portion and pension fund liabilities to the best of knowledge via Bloomberg/Reuters.
So it is correct that it is S$1 basically, shell company.

Regards

Anonymous said...

Fr what I know,one foundry costs about US$2-3 billion to build.

Chartered has how many foundries?go check.

Did Madam Ho already made back her money,I do not think so,not at all.

Would some knowledgeable experts pl prove me wrong?Thanks

Xtrocious said...

They should not include debt for a simple reason...

All the investor loses is his equity share - he is not liable for further claims beyond what he has put in

Unless the investor chooses to give a personal guarantee on the debt (which I don't think is the case here)...

Anyway, it looks like the investor is buying it at almost 1x NTA and Net Tangible Asset is basically Equity - Intangible Assets (which is already net of debt and other liabilities!)...

Ghost said...

I don't care what price they sold it for as long as it's sold. Get rid of Chartered before it bleed us even more than it had.

Anonymous said...

Lucky Tan,
you are right that debt should be included as it is very misleading. A loss is already a realized loss and no longer a true value.

The government is cheating the public and should be prosecuted themselves. The loss is even greater than the sale of the actual company !

How can this make sense ?

If a company make a loss of $40 billions like temasek and get acquired for $1 billion, can we say that Temasek get sold for $41 billions when the company is actually sold for only $1 billion.

THIS IS PURE CHEATING BY SINGAPORE GOVERNMENT by misleading public !!!!!
Vote those buggers out !

Anonymous said...

Correction
"you are right that debt should NOT be included as it is very misleading. A loss is already a realized loss and no longer a true value."

Anonymous said...

But this is true of the maxim of temasek -

'Buy high and sell low'

Anonymous said...

Did WonderWoeman Hoe Jinx sell off CSM's assets to raise some quick cash but used our blood and sweat money to pay off the liabilities?

Anonymous said...

Ghost said...
I don't care what price they sold it for as long as it's sold. Get rid of Chartered before it bleed us even more than it had.


With Wonder Woeman at the helm, there will be more creative accounting among the companies as they shift money around the TLCs incurring 'losses'. Singaporeans are so fortunate to have the opportunity to pay for her follies and mega losses.

Anonymous said...

At last willing seller, willing buyer.

Anonymous said...

I remembered someone once told me Ho Jinx caused a lot of speculators to lose a lot of money when it was reported that Temasek was interested to acquire one of the SGX companies which turn out to be a false alarm.

I just wondered whether Ho Jinx's nominee companies ever benefited from such false rumours and was immuned from prosecution under those insider trading regulations.

Integrity said...

Government, due to their universal wickedness, stipidity and corrupted in nature can only run business, that is of

1)No product differentiation ie, natural resources,

2)High entry barriers ie power or telecoms

3)Property (they are the biggest landlord and they can rob by fiat)

4)institution can can benefit heavily from government contracts ie defence or bank

Now PAP tries to run IC fab which put them on benchmark with the smartest engineers and scientist.

It shows they are really stupid.

I believe the next to fall may be our venerable SIA. Most airlines are formally national institution. Good old days are gone and we see private airlines booming.

I dont think our ex public service SIA CEO can bring it anywhere

Anonymous said...

Temasek performing what is best at: loosing money.

What 'strong' and competent board Temasek has.... Impressive.

Anonymous said...

How much money is left in the national coffer?

Anonymous said...

A shrewd way (not necessary used by scholars) to evaluate whether one has got a good deal is to find out who your counter party is. For example if I'm selling and Warren Buffet is the buyer then I must ask myself what is he seeing that I'm not. The buyer of CSM is Abu Dhabi. Several months ago, Temasek loss some $Bil selling Barclays stake. Shortly after that, Abu Dhabi announced they made several $Bil selling their Barclays stake. Readers can draw their own conclusion on which investor is more shrewd.

Anonymous said...

Temasek seems intend to clear out all its chips from the table - one "Chip" was booted out some months ago, now one has been sold. Stats Chippac must be on the block too.

Anonymous said...

hi, few months back, i was doing some research on semicon. A quick estimate, based on the company report published by UMC, It cost them approx US$3.6 billion to setup the UMC fab at pasir ris.

However, do note that 8 inch fab (Chartered type) is a lot cheaper to setup. Perhaps someone can dig out chartered financial report on this?

Anonymous said...

You all better be grateful that Ho Ching is just selling Chartered. Next time, she's going to sell Sinkapore to pay off Temasek debt!!!

Anonymous said...

Looks like the old man's wish is coming true. He will not let the opposition squander away our hard earned reserve should they become the government one day. The present government is doing a good job of that today. By the time, opposition takes over, there will be nothing left to squander. I think that is also when the people will be wise enough to vote out the incumbent. After the horses have bolted. Such is life.

Anonymous said...

To Integrity,

You are right...

With all those elites to compete on a fair ground...they crashed badly...

SIA & ASTAR ....pay close attention to these 2 as both are headed by ex-public service elites...

Anonymous said...

It is so "low class" to include the debt to inflate the purchase price to the public. They are probably afraid of further public outcry over investment losses if Chartered was sold for less.

Anonymous said...

Why dun sell our SAF off first? >:) Prehaps can recover loss quicker. gov invested billions every year in our 3G force which is one of the most technologically advance in the world. Interested buyers, Any??

Anonymous said...

Why don't we trade-in our ministers and mps for foreign talent?

www.muebles-en-vallecas.com said...

It won't work in reality, that's exactly what I consider.

Freddy said...

Why dun sell our SAF off first? >:) Prehaps can recover loss quicker. gov invested billions every year in our 3G force which is one of the most technologically advance in the world. Interested buyers, Any??