European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>On 1 February, Siltronic announced that the public tender offer by GlobalWafers will not be completed as offer conditions have not been fulfilled within the applicable deadline.</li>
<li>Germany's Economy Ministry could not complete all the necessary review steps. The deal rationale was compelling. Wacker Chemie still intends to sell its remaining 30.83%. GlobalWafers may bid again.</li>
<li>As the industry deals with overcapacity, Siltronic could be worth more as a standalone business. Longer term, TP is €162.64/share (comparables based), 12% above Siltronic's offer</li>
</ul>


On 1 February, Siltronic announced that the public tender offer by GlobalWafers will not be completed as offer conditions have not been fulfilled within the applicable deadline.
Germany's Economy Ministry could not complete all the necessary review steps. The deal rationale was compelling. Wacker Chemie still intends to sell its remaining 30.83%. GlobalWafers may bid again.
As the industry deals with overcapacity, Siltronic could be worth more as a standalone business. Longer term, TP is €162.64/share (comparables based), 12% above Siltronic's offer


Globalwafers/​Siltronic: There Is Still Value in Siltronic

Taiwan Tech Focused Senior Analyst

Patrick Liao

Equity Bottom-Up

<ul>
<li>We think the chance for GlobalWafers mergence case to have the final approval could be high. Even if it finally failed, the raw wafer supply should be full until 2024.</li>
<li>This deal was granted by seven governments and organizations already. And it is still under review of Chinese and Japanese governments.</li>
<li>The deal will not change the worldwide raw wafer supply status, especially such supply tightness. To our understanding, the secrets to achieve success are cost reduction and resource management mostly.</li>
</ul>


We think the chance for GlobalWafers mergence case to have the final approval could be high. Even if it finally failed, the raw wafer supply should be full until 2024.
This deal was granted by seven governments and organizations already. And it is still under review of Chinese and Japanese governments.
The deal will not change the worldwide raw wafer supply status, especially such supply tightness. To our understanding, the secrets to achieve success are cost reduction and resource management mostly.


Globalwafers (6488.TT): Stock Price Can Go Higher Even If Siltronic Mergence Case Failed

<ul>
<li>Both Siltronic and Globalwafers expected the transaction to be completed in H2 2021, which has not yet happened. The closing remains subject to receipt of further regulatory approvals.</li>
<li>The deal has to be renegotiated if China and Germany do not approve the deal by 31 January (although Siltronic expects this to happen), in the context of strong growth.</li>
<li>
Gross spread at the closing share price on 28 December is 3.1%. Recommendation is long WAF GR. There is the possibility of further upside in case of terms renegotiation.</li>
</ul>


Both Siltronic and Globalwafers expected the transaction to be completed in H2 2021, which has not yet happened. The closing remains subject to receipt of further regulatory approvals.
The deal has to be renegotiated if China and Germany do not approve the deal by 31 January (although Siltronic expects this to happen), in the context of strong growth.

Gross spread at the closing share price on 28 December is 3.1%. Recommendation is long WAF GR. There is the possibility of further upside in case of terms renegotiation.


Globalwafers/Siltronic: Possibility of Terms Renegotiation

Independent Insight Provider, Japanese equities, LightStream Research

Scott Foster

Independent Insight Provider, Japanese equities

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Year-on-year sales and profit comparisons turned positive in 2Q of FY Dec-21 and management is guiding for further improvement in 3Q. But the share price has dropped 23% since mid-July,Potential reasons for the sell-off include concern over the resurgent pandemic, price competition, an over-heated semiconductor market and plans for new green field investment, which could limit profitability.On the plus side, management reports that contract prices are firm, spot prices have started to rise and customer inventory has been declining. Supplies of both 300mm and 200mm silicon wafers remain tight.Taking an optimistic view of logic and memory demand over the next few years, we recommend buying into the current weakness.

Year-on-year sales and profit comparisons turned positive in 2Q of FY Dec-21 and management is guiding for further improvement in 3Q. But the share price has dropped 23% since mid-July,Potential reasons for the sell-off include concern over the resurgent pandemic, price competition, an over-heated semiconductor market and plans for new green field investment, which could limit profitability.On the plus side, management reports that contract prices are firm, spot prices have started to rise and customer inventory has been declining. Supplies of both 300mm and 200mm silicon wafers remain tight.Taking an optimistic view of logic and memory demand over the next few years, we recommend buying into the current weakness.

As of 22 January, <a href="https://www.smartkarma.com/entities/globalwafers-co-ltd" target="_blank" data-smartkarma-citation="entities:17916:1" rel="noopener">Globalwafers (6488 TT)</a> revised the terms of the offer for <a href="https://www.smartkarma.com/entities/siltronic-ag" target="_blank" data-smartkarma-citation="entities:21741:1" rel="noopener">Siltronic AG (WAF GR)</a>  and increased the bid price to €140 per share.
On 23 January, GlobalWafers announced that the offer price has been increased to €145, due to alongside purchases by GlobalWafers at such price.
<ul>
<li>The minimum acceptance threshold has been lowered to 50%.</li>
<li>The acceptance period has been extended to 10 February.</li>
<li>GlobalWafers said the offer is "final".</li>
<li>All other Ts&amp;Cs remain unchanged.</li>
</ul>
Shareholders who tender their shares will obtain €145 per share + €2 as FY 2020 dividend, in total €147 (I have just confirmed this with Siltronic's IR).
The 16% offer increase (vs. the initial €125 per share) by GlobalWafers represents a last push to ensure success of the takeover offer.
<ul>
<li>Since the last offer, GlobalWafers has accumulated a 4.53% stake, which along with the irrevocable undertaking from Wacker (i.e. 30.8%) represents 35.33%.</li>
<li>Obtaining acceptances from 22.7% of the float should not be difficult.</li>
</ul>
On 25 January, Siltronic opened at €144 is trading mid-morning at €141.45 (with over €42 million traded).
<ul>
<li>This represents a gross spread of 3.77%, including €2 dividend (before considering any withholding tax), c. 15% annualized assuming completion in three months. </li>
<li>Recommendation is Long Siltronic, the bid is very likely to succeed plus the shares are supported by good prospects for the semiconductor industry.</li>
</ul>

As of 22 January, Globalwafers (6488 TT) revised the terms of the offer for Siltronic AG (WAF GR)  and increased the bid price to €140 per share.
On 23 January, GlobalWafers announced that the offer price has been increased to €145, due to alongside purchases by GlobalWafers at such price.

The minimum acceptance threshold has been lowered to 50%.
The acceptance period has been extended to 10 February.
GlobalWafers said the offer is "final".
All other Ts&amp;Cs remain unchanged.

Shareholders who tender their shares will obtain €145 per share + €2 as FY 2020 dividend, in total €147 (I have just confirmed this with Siltronic's IR).
The 16% offer increase (vs. the initial €125 per share) by GlobalWafers represents a last push to ensure success of the takeover offer.

Since the last offer, GlobalWafers has accumulated a 4.53% stake, which along with the irrevocable undertaking from Wacker (i.e. 30.8%) represents 35.33%.
Obtaining acceptances from 22.7% of the float should not be difficult.

On 25 January, Siltronic opened at €144 is trading mid-morning at €141.45 (with over €42 million traded).

This represents a gross spread of 3.77%, including €2 dividend (before considering any withholding tax), c. 15% annualized assuming completion in three months. 
Recommendation is Long Siltronic, the bid is very likely to succeed plus the shares are supported by good prospects for the semiconductor industry.


Germany

Siltronic AG manufactures hyperpure silicon wafers. The Company offers products including non-polished and epitaxial coated wafers with different diameter sizes. Siltronic caters its products worldwide for use in computers, smartphones, flat-panel displays, navigation systems, automotive engine control systems, and many other applications.

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Siltronic AG (WAF GR)

Globalwafers/Siltronic: There Is Still Value in Siltronic

Siltronic announced that the public tender offer by GlobalWafers will not be completed as offer conditions have not been fulfilled within the...

Jesus Rodriguez Aguilar

Globalwafers (6488.TT): Stock Price Can Go Higher Even If Siltronic Mergence Case Failed

The chance for GlobalWafers to have the final approval could be high. Even if it finally failed, the raw wafer supply should be full until 2024.

Patrick Liao

Globalwafers/Siltronic: Possibility of Terms Renegotiation

In the context of strong growth for the semis, the offer price is looking increasingly cheap. If German and Chinese regulators do not clear the...

Jesus Rodriguez Aguilar

SUMCO (3436 JP): Buy on Weakness

Share price down more than 20% since mid-July, offering a medium- to long-term buying opportunity. Silicon wafer supplies tight, pricing firm....

Scott Foster

GlobalWafers Ups Offer for Siltronic

On 25 January, Siltronic trades mid-morning €141.45 (over €42 mn vol.), gross spread 3.8% including divi (c.15% annual.) LONG Siltronic, bid likely...

Jesus Rodriguez Aguilar

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Globalwafers/​Siltronic: There Is Still Value in Siltronic

Siltronic announced that the public tender offer by GlobalWafers will not be completed as offer conditions have not been fulfilled within the...

Jesus Rodriguez Aguilar

Globalwafers (6488.TT): Stock Price Can Go Higher Even If Siltronic Mergence Case Failed

The chance for GlobalWafers to have the final approval could be high. Even if it finally failed, the raw wafer supply should be full until 2024.

Patrick Liao

Globalwafers/Siltronic: Possibility of Terms Renegotiation

In the context of strong growth for the semis, the offer price is looking increasingly cheap. If German and Chinese regulators do not clear the...

Jesus Rodriguez Aguilar

SUMCO (3436 JP): Buy on Weakness

Share price down more than 20% since mid-July, offering a medium- to long-term buying opportunity. Silicon wafer supplies tight, pricing firm....

Scott Foster

GlobalWafers Ups Offer for Siltronic

On 25 January, Siltronic trades mid-morning €141.45 (over €42 mn vol.), gross spread 3.8% including divi (c.15% annual.) LONG Siltronic, bid likely...

Jesus Rodriguez Aguilar

Globalwafers/Siltronic: There Is Still Value in Siltronic