Temasek to suffer heavy loss from sale of Chartered Semiconductor to Abu Dhabi’s ATIC
September 6th, 2009 | 
Author: From our Correspondent
Singapore’s semiconductor industry had floundered in recent years with mounting losses caused by reduced demand and intense competition from Taiwanese and U.S. chipmakers, a situation exacerbated by the global financial crisis.
Once the crown jewel of Singapore inc, Chartered Semiconductor has struggled to make a profit in the last two years.
Chartered Semiconductor was created in 1987 as a venture that included Singapore Technologies Engineering Ltd., another state-linked company owned by Temasek Holdings.
When its shares were first floated in the market in 1999, IPO price was USD $20 10 years later, it is worth only USD$1.86 per share. (Source: Money Central) At current prices, Temasek may lose up to S$16 billion dollars from the deal. (also read here)
Advanced Technology Investment Co., an investment company owned by Abu Dhabi, will pay S$2.68 ($1.86) a share in cash for Chartered Semiconductor. It will spend a total of S$2.5 billion to buy Temasek’s stake of 62 per cent or 930 million shares in the company.
In Monday’s statement, the companies said Temasek fully supports the acquisition by ATIC and will vote in support of the transaction.
Abu Dhabi plans to combine Chartered Semiconductors with Globalfoundries Inc., a venture ATIC created with Advanced Micro Devices Inc. last year.
Temasek will be relieved to be rid of an unprofitable company which is encountering difficulties to keep itself afloat. In January this year, Chartered Semiconductors retrenched 600 workers in Singapore. (Source: CNA)
Chartered Semiconductor today also raised its third-quarter forecasts for revenue and earnings. Revenue will range from S$405 million to S$415 million, up from a forecast of S$382 million to S$394 million, according to a statement.
The company now anticipates results to range from a net loss of S$8 million to breakeven, an improvement from a loss of S$27 million to S$17 million. Chartered Semiconductor has reported losses in the previous four quarters.
Globalfoundries Chief Executive Officer Doug Grose will run the combined operations, ATIC said. Chartered Semiconductor CEO Chia Song Hwee will be chief operating officer and will be in charge of integrating the operations.
Ironically, Mr Chia said that Chartered has a chance of breaking even in the third quarter ending Sept. 30, noting that the company has upgraded its outlook for the period amid improving market conditions.
Globalfoundries has been facing an uphill battle against No. 1 player Taiwan Semiconductor Manufacturing Co. and second-ranked United Microelectronics Corp., both of Taiwan. It currently has just one manufacturing base in Dresden, Germany, and has a weak client base with just AMD as its primary customer.
By adding Chartered, analysts said Globalfoundries would gain access to a broader set of clients like Broadcom Corp. and Qualcomm Inc., and position itself for growth with a US$4.2 billion plant in New York state that could be fully ramped up within as early as three years.
This may very well put Globalfoundries in a position to pose a legitimate threat to TSMC and UMC in the contract chip manufacturing market later down the road. (Source: WSJ)
The semiconductor industry was once touted as a key industry for Singapore in the 1990s as it shifted away from low-cost manufacturing and electronics industry to high-end technologies.
It was not known how much money the Singapore government had invested initially to set up Chartered Semiconductor’s operations.
Despite a good start, Chartered Semiconductor soon find itself up against larger players in a field dominated by Taiwanese chipmakers.
Temasek’s exit from Chartered Semiconductor will mark the dawn of the semiconductor industry in Singapore and yet another blemish on its record under the leadership of Ho Ching after Shin Corp, ABC Learning, Merrill Lynch and Barclays Bank.
Related articles:
>> Abu Dhabi to buy Chartered Semiconductor
>> How Norway manages its Sovereign Wealth Fund by Fang Zhi Yuan
>> Temasek’s spin doctors at Straits Times try to salvage battered image
>> Temasek outperforms? by Edmund Khor
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“When its shares were first floated in the market in 1999, they were sold in the pricing range of between $16 and $18 a share. 10 years later, it is worth only $2.66 per share. (Source: IPO Investor)”
Hi Editor: I believe you have to take into consideration the recent reverse split (10:1), so, in actual fact, comparing apple-to-apple, the share is worth only $0.266 (vs $16-18).
Hi anon,
Yes, we have heard about it, but unable to find any sources on the internet to substantiate it.
Do you have any links to back up?
admin, i was one of the initial IPO buyer and can attest to the fact that the shares were not floated for $16 to $18 as you said! (source: SGX)
I cannot understand why u would not have an exact price to the IPO if u want credibility in your report!
FYI, I am not a PAP supporter, so pls get your facts right!
Whatever ho ching does, she is still the best talent we have got. Let’s move on!
Try http://www.lioninvestor.com/chartered-rights-issue/
Chartered Rights Issue
Published by lioninvestor at 4:42 am under Shares
Chartered Rights Issue (pdf)
Chartered Semiconductor Manufacturing (CSM) announced yesterday that they would be raising approximately US$300 million from a rights issue. Existing shareholders (as well as ADS holders) will be able to subscribe for 27 new Chartered shares at a price of S$0.07 for every 10 Chartered shares that they own.
The last traded price of Chartered was S$0.20 so the theoretical ex-rights price works out to be S$0.1065.
Singapore Technology Semiconductor (STS), a wholly owned subsidiary of Temasek Holdings, will take up its entire 59.36% of the rights. In addition, it will be on standby to take up any excess rights (up to 90% of total shares) not taken up by other shareholders.
Key dates are as follows:
Shares trade ex-rights: 16th March 2009 from 9am
Despatch of offer document: 23rd March 2009
Commencement of trading of Rights : 23rd March 2009 at 9am
Last day of trading of rights: 31st March 2009 at 5pm
Last day and time for acceptance and payment for Rights Shares and excess Rights Shares: 6th April 2009 at 5pm (930pm for electronic)
Expected date of trading of Rights Shares : 16th April 2009
The rights offer document can be found here:
Chartered Rights Issue Document
Chartered shareholders would have the following options.
Assuming someone bought 10000 shares of Chartered at $0.20 (total cost $2000)
Option 1 (Subscribe for own rights)
Subscribe for 27000 rights shares at $0.07 each (total $1890)
Average cost of 37000 shares = $0.105
Option 2 (Subscribe for own rights and excess rights)
Note that priority for excess rights will be given to the rounding of odd lots. Other than that, all shareholders will be given the same priority. This is unlike the Capitaland rights issue where the substantial shareholders were given the least priority. So, the likelyhood of getting excess rights will be lesser. This would of course be affected by the demand and trading price of Chartered shares after this rights announcement.
Subscribe for 27000 rights share at $0.07 each (total $1890)
Subscribe for (say) 3000 excess rights share at $0.07 each (total $210)
Average cost of 40000 shares is $0.1025
Option 3 (sell off rights)
Assuming price of Chartered is at $0.105 after ex-rights.
Sell off 27000 rights at $0.035 each ($945)
Average cost of 10000 shares is $0.1055
Option 4 (Do nothing)
Average cost of 10000 shares remains at $0.20 (no change)
Option 4 is the sure lose option unless the the trading price of Chartered actually falls below S$0.07. In which case Singapore Technology Semiconductor will probably end up taking up most of the rights shares.
Chartered Share Consolidation
Following the rights exercise, Chartered will also be looking to do a share consolidation exercise of 10 shares into 1. This will have to be approved at a shareholders meeting.
I was one of those successful applicant of the IPO then. I vaguely remember the IPO price was approx $2. On debut, it shot up to about $5 on the first day.
And few months back, there was a 10 to 1 consolidation. So, you can consider the IPO price to be $20 after factoring the consolidation.
Admin
Looking at its Nasdaq ADR listing from year 2000, the losses are phenomenal – STAGGERING. Here is the link.
http://finance.yahoo.com/q/bc?s=CHRT&t=my
Its ADR price now is US$18.78 last done.
THANK GOD SOMEONE TOOK THIS PIECE OF SH$T OF OUR HANDS… IT WAS LIKE A BLEEDING TAP DRIPPLING BLOOD ENDLESSLY
I’m very surprised after hearing this news that temesak has decided to sell chartered semi con. But then again, if temesak can sell away it’s power station which is suppose to be a national strategic asset, what’s next??
I quoted from channelnewsasia forum below.
Just some clarification here. The actual IPO price is US$20 per ADR listed on NASDAQ. In Singapore dollars the IPO was $3 plus. How much is Temasek’s actual cost of the share we must dig out the original IPO prospectus and see. Hence I don’t think Temasek will be losing as much as 10 billion plus as what the thread starter wrote (not sure if there is any lost by Temasek). However one thing for sure is those investors who were alloted at IPO price and hold until now sure lose until pants dropped because of the recent 10:1 consolidation and rights issue. Those who bought from the market when it reach SGD 16 and hold until now sure lose until underwear also dropped.
http://www.zdnetasia.com/news/hardware/0,39042972,13020290,00.htm
http://moneycentral.hoovers.com/global/msn/factsheet.xhtml?COID=57485
Hi admin
You can read the following masnet announcements about the 1 for 10 reverse stock split.
10 Mar 2009
Adjustments to Conversion Price due to Rights Offering and Consolidation
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_1F3DC89A7A25F846482575750031F46E/$file/529741GSCallAdjustsgx.pdf?openelement
21 May 2009
Adjustments to Conversion Price due to Consolidation
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_8A0F2518D7BB54A5482575BD0036E462/$file/AnnAdjmttoCRPSConversionPriceConso21May09sgx.pdf?openelement
The headline of ST on 8 Sep stated “Abu Dhabi fund offered $5.6b for Chartered”. This is a misleading statement. The Abu Dhabi fund pays US$1.8b (approximately $2.5b) only. The discrepancy of $5.6b-$2,5b = $3.1b is due to Abu Dhabi assuming Chartered’s debt of $3.1b.
Is it an established practice for a financial news story to report a takeover offer price inclusive of the target company’s debt? I very much doubt so!! Needless to say, there is no mention of Temasek suffering any losses.
The job of our elite groups from Singapore – uniquely Singapore, indeed.
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.
everything ho ching touches turns to shit
What Ho ChinKg has always been very good at IS LOSE MONEY in BIG WAYS whichever company plain jane ‘chief’ goes!!!
Didn’t the jane bring down Chartered Semiconductor and left some 6 months BEFORE that ANG-MO did??? To show THAT she WASN”T THE one who brought the company down to below knee level!!! As she bought into that 3rd largest disk drive company called “…….” WHAT HAH … madam jane??? The loses were SOMETinKK Like 1.5 to 2 MILLION S$$$s Or WAS IT … US$$$s a DAY … madam jane??? Lost some $700MILs and with OTHER LOSSES IN STATS (now “-Chipac”)ET CETERA right or not can anymore fill in the BLANKS please!
And Pidemco which made $2+ BILLION WAS put under St Technologies to Metigate THE TOTAL LOSSES obviously. Then several years later … CapiTALand was BORN!!! … with Pidenco Land + DBS Land and a smaller “Land” I never cared to remember!!! HISTORIES were THUS CREATED and hopefully all BIG LOSSES BE Forgotten By “Absent AND Short Memory Singaporeans”???
Wah Lau … OOi!!! How many ROUNDS AND TIMES OF BIGGY LOSSES BeFore they will acknowledge plain jane’s SUPREMACY AT DOING HUGE LOSSES in Business AND Investments???!!! … And SO …
Would IT NOT have been MUCH CHEAPER to have given plain jane 1/2 or 1 BILLION in special bonuses BEFORE she made any losses YAH!!!??? … Any where … AS HAS HAPPENED … FROM
SemCorp … TO ST Tech, Chartered & STATS … TO Temasek AND STILL known AsS THE GREATEST AH!!! Now Lau Goh of $600,000 PEANUTS Fame!!! … Danabalam … Apa-in-law … DO they all have to take back and eat those praises they had HEAPED upon you now who some years back.
The way I write … been wondering … if I’ll be getting “An UNHOLY” knock on my main door one day??? No more SB or “Special Branch” … But there’s the others right!!!!
Frankly I am happy for Temasek. Standard Chartered finally is sold so we can concentrate on what we do best.
No point being sinister unless you dislike Singapore. Surely in business sometime we win and sometime we loose.
I don’t think there is corruption, so losing is fair game.
Maybe Ho Ching should go and take a flower bath and try harder to make us money from now onward. Purchases of Micropolis and ABC is off the mark. Selling BOA in panic is also not acceptable, as it had already fallen so much!
Stay cool not smug!
//Thinktok
you are very confident with the way HC is going to handle the remaining assets.
She had been handling that for the last 6 years. Nothing worked.
“Thinktok” … Did you know what h-c said about the LOSING Micropolis she bought WITH GREAT CONFIDENCE when it started FAILING … Well … She told the MSM TO THE EFFECT that “WHEN WE BOUGHT IT … THERE WERE ONLY 3 DISK DRIVER MAKERS … AND MICROPOLIS ‘WAS’ No. 3. But AFTER WE bought it there is now 4″ …
A 4th AND New Disk Drive ‘PLAYER’ … Likely WITHOUT Micropolis’s Customer based and Manufacture and INfrastrure CAUSED “THE PROBLEM OF HUGE Daily LOSSES in THE MILLIONS??? WAH AH AH ARGH!!! THE “NEW” PLAYER “TOOK” SO MUCH BUSINESS AWAY “FROM Micropolis” TILL It WENT DOWN UNDER And COLLAPSED???
A REAL sMuG of a SmOOth talk of a business person AIN”T IT!!! “DIRT … OF Self-Creation … MOST CONVENIENTLY SWEPT UNDER A Carpet CALLED “NEW 4th Disk Driver Maker AFTER Micropolis WHO WAS 3rd when she BOUGHT MICROPLIS”!!
WAH LAU … Want TO “Pee_ant” (BLUFF!!!) OSO NOT like THAT AND TO US Adults TOO. You mean there AREN”T NO Reaaly SMART AND ReLEVANT GUYS OUT THERE IN THE MARKET PLACE WHO CAN KNOW IT WAS A BIG CON REPLY??? … Want to pee_ant OSO DON”T KNOW HOW To DOO a good JOB of It as well “Thinktok”. And SO … Thinktok STILL BeLIEVES IN H-C haw!!! A case OF “Birds OF A Feather FLOCK Together” YAH!!!
I cannot believe that despite all these failures and loses, our Gov still thinks Ho Jinx is a talent??
Removing Ho Jinx is the beginning of accountability. Without it, I can never, ever trust this bunch of imbeciles who thinks they are someone and demands a king’s ransom for salary.
Thinktok on Tue, 8th Sep 2009 8:12 pm
“Frankly I am happy for Temasek. Standard Chartered finally is sold so WE can concentrate on what WE do best.”
Halo, what are the things you do best? Can share share or not? So far i see nothing good come out. Only the horrendous losses and still think there is something they can do best. WTF!!
U part of that Jink gang? If so, shame on you!
While I sympathize with investors who did not cut their losses, the real loss to Temasek is considerably less even allowing for the accumulated losses since its start-up. The plant cost around S$2 bil to built then and if not for its deep-pocket parent, should had been closed long ago. The Arabs certainly must know something that even the Taiwanese do not know. Good luck to them.
Actually, for once, I might agree, or disagree, depending on the perspective from which you take my comments. Yes, I agree it is horrible that we have to lose out so much on Singapore’s investments, but then again, there’s really nothing else that can we can do at this point in time. The semiconductor industry has long been a sunset industry for Singapore, and it’s really better that we sell it off late than never, lest we make even further losses. We cannot compete with Taiwan on our own, and the Dubai company has other semiconductor companies under its wing which it can merge with Chartered to create a formidable competitor to Taiwan. When that happens, and if Chartered is still around in Singapore, I forsee we could still benefit from having jobs in a company that would be not longer doomed to snuff itself out. The only thing we can ask is why Temasek didn’t sell it off earlier, but much unlike its other investments in certain financial institutions, these can actually be somewhat harder to forsee.