NST Business
KUALA LUMPUR: Today could be the D-Day for SilTerra Malaysia Sdn Bhd and its suitors.
This is when Khazanah Nasional Bhd will most likely decide on the takeover offer for SilTerra which has been whittled down to two local companies from four bidders originally, people familiar with the matter said.
As Khazanah ditched earlier plans to sell its blue-chip wafer fabrication company outright to foreign investors, its board will meet and deliberate which of Green Packet Bhd and Dagang Nexchange Bhd (DNeX) is the preferred choice to turn around SilTerra.
Sources said the proposals by the two listed companies were compelling, although they were not without key concerns.
Both had outlined plans to resolve SilTerra challenges and shortcomings as well as support local technology development agenda particularly by working closely with the Ministry of Science, Technology and Innovation (Mosti) and its agency Mimos Bhd, they said.
This is in addition to direct cash payments to Khazanah.
Green Packet is believed to have offered a swathe of development plans along the technological lines of AI (artificial intelligence), big data, blockchain, cloud and Internet of Things.
The grand plan entails a 6,500-acre of development across the range of technologies, with SilTerra intended to be the centrepiece that drives the value chain.
DNeX seems to have the edge though, the sources said.
Government officials had felt the company, already vertically focused on semiconductor development, had a clearer roadmap on how to turn SilTerra around, they added.
DNeX has secured a commitment from several partners in micro-electromechanical system (MEMS), GaN foundry and other integrated circuits (ICs) to commit production in SilTerra to bring up its average selling price (ASP) per wafer even before the deal had taken place.
The company is backed by strategic partner Beijing CGP Investment Co Ltd (Beijing CGP) and a few limited partners (LPs).
Beijing CGP is a RM15 billion fund headquartered in Beijing.
It specialises in IC development with LPs comprising China Integrated Circuit Industry Investment Fund Co Ltd and eTown Capital with combined funds of 200 billion renminbi.
"With the support of highly credible partners in Beijing CGP and a few LPs, DNeX has a clearer roadmap in particular in regards to technology transfer from its partners' portfolio to SilTerra and other local players," one of the sources said.
Beijing CGP, the source added, was a private equity specialist in semiconductor technologies with broad reach across a range of companies in design, fabrication, equipment and ATP.
"Through Beijing CGP's network, SilTerra can immediately ramp up production with the help of China's number one display drive IC company, ChipOne, plus GaN power devices through Sai Microelectronics ."
Over the medium-term, there could be transfer of technologies to the local sector to serve worldwide customers through the world's number one MEMs foundry Silex, the source noted.
Additionally, DNeX offered an initial capital via an innovation fund, while one of its key partners has experience in commune system.
The New Straits Times previously reported that Khazanah had extended the takeover tender for the world-class but loss-making semiconductor firm to October 9 last year from July 31 originally, as it made some changes to the terms and conditions of the tender.
Documents seen by the NST showed that overall, the updated proposal from DNeX, in a 60:40 consortium with Beijing CGP, was focused on planning and executing SilTerra's turnaround with a total investment that could reach nearly RM1 billion over the short to medium haul.
On top of a RM260 million cash payment for Khazanah, DNex and its partner will immediately inject RM200 million into SilTerra's operations.
There is an additional RM300 million for debottleneck capacity in the medium term and long-term potential investment of a whopping RM10.5 billion to set up a 12-inch fab.
Green Packet, in a 55:45 consortium with Dongfang Huijia Zhuhai Asset Management Co Ltd, has put in a bid with two options.
The first option is to pay Khazanah RM235 million with a Bumiputera ownership in SilTerra at 30.25 per cent.
The second one is to pay RM334 million (presumably without Bumiputera stake quota) or US$150 million if forgo local ownership and with an offer to the Finance Ministry/Mosti/Mimos to own a 10 per cent SilTerra stake.
The sources also highlighted some key concerns regarding Green Packet and DNeX's proposals.
DNeX's narrow focus around the fab may deter its interest to develop a bigger agenda for the industry value chain.
The company's diversity with exposure in trade as well as oil and gas might distract strong focus on the semiconductor and electrical and electronics sectors, they added.
For Green Packet, the main concerns are how genuine was its intention and the strength and credibibility of its partners.
The sources said there was a thinking that the company's primary interest was in a real estate in the northern region.
As for its partners, they said consortium partner Dongfang Huijia was generally an asset management company and not sector focused.
Green Packet's two other strategic partners have experience in industrial park and electronic component distribution, and not microchip companies or producers.
This might not lead them to having direct influence or control over semiconductor value chain, although it might provide market access to capitalise SilTerra's ASP, the sources added.