ATIC offers $1.8 bn for Chartered Semi

SINGAPORE:  Abu Dhabi's state fund ATIC has offered to buy Singapore contract chipmaker Chartered Semiconductor for $1.8 billion as it looks to become a major force in the global microchip industry.

This would be the second big investment by Advanced Technology Investment Co (ATIC) after it spent $2.1 billion earlier this year on a 55.6 percent stake in a joint venture, Globalfoundries, with Advanced Micro Devices Inc .

The combination of Globalfoundries and Chartered would create a major rival to Taiwan's TSMC and UMC, which control about two-thirds of the $20 billion chip foundry market.

Loss-making Chartered, which makes chips used in Microsoft's Xbox 360 game console, has struggled against its bigger Taiwan competitors in scale and capacity, and this deal may help it tide over its financial woes.

"That makes sense because Chartered needs to find some way to survive," said Eric Chen, a semiconductor analyst with BNP Paribas, based in Taipei.

Chartered booked a net loss of $39.4 million including a tax benefit in the second quarter -- its fourth straight quarterly loss.

ATIC offered to buy Chartered for S$2.68 a share, slightly above its Friday close of S$2.66. Chartered shares, which were suspended, have more than doubled this year on speculation about a takeover.

Singapore investment agency Temasek Holdings, which has a 62 percent stake in Chartered, fully supports the acquisition, Chartered said in a statement.

The deal, which is subject to regulatory and shareholder approval, is expected to close during the fourth quarter.

Chartered said the deal represents an equity value of around S$2.5 billion, and a total value of about S$5.6 billion ($3.9 billion) including debt and convertible redeemable preference shares.

The Abu Dhabi fund, which is fully owned by the government, said the deal would help expand its investments in the semiconductor industry, which currently consist of a facility in Dresden, Germany and a new, state-of-the-art facility under construction in New York.

"Chartered and Globalfoundries are well positioned to meet the growing chip demand to come from billions of new mobile phones, cars, televisions, computers and other devices," said Ibrahim Ajami, CEO of ATIC.

Doug Grose, CEO of Globalfoundries, would serve as chief executive of the combined operations, with Chia Song Hwee, CEO of Chartered, as chief operations officer after the deal is completed.

Morgan Stanley and Citigroup advised Chartered. Deutsche Bank  will advise Chartered shareholders.

Separately, sources at Japan's Toshiba Corp said the world's No.2 maker of NAND flash memory chips was in talks with Chartered Semiconductor and Globalfoundries about outsourcing production of some of its next-generation system chips to help cut costs.