Pau Jar has been accumulating Tecos shares since last year and the exchange of shares would reduce his stake in the company from 26.46% to 24.34%.
By Chen Cheng-hui / reporter
Leading industrial engine maker Teco Electric and Machinery Co Ltd () and power cable maker Walsin Lihwa Corp () announced on Friday that they would form a strategic alliance through a share swap.
As part of the deal, the two companies plan to issue 171.1 million and 205.33 million new shares, respectively, and then exchange shares, with a share exchange ratio set at one share. Walsin for 0.83 Teco shares, Teco spokesman Kevin Yeh () and Walsin’s chief of staff Sophi Pan () said at a joint press conference at the Taiwan Stock Exchange in Taipei.
After the transaction, Teco would hold a 6.37% stake in Walsin and Walsin would have an 8% stake in Teco, the companies said.
Photo: Bill Chen, Taipei Times
The companies expect to complete the share exchange on Jan.6, they said.
To improve the competitiveness of both sides, we will cooperate … in the deployment of next-generation smart grids, smart manufacturing and new energy industry applications, Teco said in a regulatory filing.
The agreement is expected to combine the advantages of both sides to establish a long-term cooperative relationship on the basis of mutual benefit … to jointly open up new industrial situations, he added.
Founded in 1956 for the production of motors, Teco also develops and designs energy efficient infrastructure support solutions and electrical products.
Although sales in the automotive segment fell this year due to the COVID-19 pandemic, gains in the company’s financial investments, the reversal of tax provisions and better cost control allowed the company to ‘Record a net profit of NT $ 2.73 billion (US $ 94.73 million). in the first three quarters of this year, up 5.41% from NT $ 2.59 billion a year earlier.
Earnings per share for the nine-month period were NT $ 1.41, compared to NT $ 1.33 a year earlier.
Walsin Lihwa was established in 1966 and is engaged in the fields of wire and wiring, stainless steel, renewable energy, smart grids and commercial real estate.
The company reported net profit of NT $ 4.82 billion in the first three quarters, an increase of 118% from NT $ 2.21 billion a year earlier, bringing earnings per share to 1 , 46 NT dollars against 0.66 NT dollars over the period.
The strategic alliance will focus on four main areas, namely smart grids, integration of existing customers and industries, the new energy market in the United States and the development of the green energy industry. Walsin said in his statement.
By leveraging the strengths of both sides … we can deepen the relationship and jointly explore opportunities in various sectors, the company said.
While the two companies said they expected synergy, market watchers said the alliance could counter the growing influence of New Taipei City-based developer Pau Jar Groups () in Teco after its proposal for a 10% capital reduction was rejected by Teco shareholders on May 11.
Due to Tecos’ strong balance sheet and stable cash flow, Pau Jar has accumulated shares in the electromechanical company since last year through PJ Asset Management Co Ltd (), Jaryuan Investment Co Ltd () and Yuan Tong Investment Co (), thus becoming the largest shareholder.
To counter Pau Jar, Teco proposed in April that strategic investors be invited to participate in a private placement to dilute Pau Jars’ stake, but it abandoned the plan later in the month.
Nonetheless, the share swap between Teco and Walsin is expected to reduce Pau Jars’ stake in Teco from 26.46% to 24.34%, market watchers said.
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