KUALA LUMPUR – The sale of SilTerra Malaysia Sdn Bhd is hotting up, with sources expecting Khazanah Nasional Bhd, which owns the semiconductor fabricating company, to announce a buyer soon.
Two local players are in pole position, namely Nuglobal Ventures Sdn Bhd (NGV) and Dagang NeXchange Bhd (DNeX), said a source.
Both companies are bringing almost similar terms to the table – assuming SilTerra’s debt of RM210 million, investing in future growth and facilitating market access – with the sole difference being their bid prices.
However, it is understood that Khazanah is partial towards DNeX due to NGV’s main investor being Green Packet Bhd, which sources said is a disadvantage as Green Packet is not a Bumiputera company.
Green Packet comes in via a private equity technology fund with access to a funding pool of up to RM500 million. This allows NGV to offer a higher bid at RM273 million, while DNeX is throwing in RM260 million.
DNeX’s bid had always been the lowest when Khazanah was seeking potential buyers, which back then included the likes of international players Foxconn of Taiwan and Germany’s X-Fab.
Foxconn threw in the highest bid at RM516 million, while not much is known about X-Fab’s offer.
“All things being equal,” said observers, “the higher bid in principle should be selected.”
NGV is an investment holding company majority-controlled by local and Bumiputera entities and businessmen. Among its directors, according to January 27 company filings, are Md Radzi Din, Tengku Amir Putra Tengku Kamal Bharin and Abdul Shukor S.A. Karim.
Shareholder-wise, SilTerra would be controlled by Bumiputera and local personalities, including Radzi, while NGV’s foreign partner, Orient Excellent, would take the remaining stake.
Orient Excellent is a China-based private equity fund with a fund size of US$700 million (RM2.8 billion) invested in high-tech industries, such as technology, media and telecommunications, as well as high-tech manufacturing, fabless semiconductor players and consumer electronics.
Green Packet, meanwhile, is also in the process of securing funding from other limited partners, including but not limited to public and private venture capital managers.
Investments will be done under an arms-length commercial instrument, which will be paid down over time through returns from investment or other alternative funding secured in the future. In return, the technology fund will receive periodic coupon/dividends from local and Bumiputera shareholders.
DNeX’s bid consists of a 60:40 consortium with Beijing CGP Investment Co Ltd and entails spending about RM500 million, including further capital expenditure and the purchase of new equipment.
CGP has a fund size of US$3.71 billion that specialises in integrated circuits (IC) development, and is believed to be a proxy for the Chinese IC industry. It counts Semiconductor Manufacturing International Corp among its investees.
DNeX, a publicly listed company, has Datuk Seri Syed Zainal Syed Mohamed Tahir as group managing director, and its major shareholders include Arcadia Acres Sdn Bhd (45.5%) and Azman Karim (13%).
The important thing to watch for, said sources, is the remittance from China, since both entities are partnering with China-based funds. Insiders said NGV has already secured its funds.
“Remittance of funds from China cannot be ‘pre-approved’. It is erroneous to claim that Chinese authorities can ‘pre-approve’ the remittance of funds out of the country. The regulatory process can only commence once legally binding transaction documentation is ready to be submitted.”
People familiar with the matter said any overseas investment by Chinese enterprises in a non-sensitive sector is only subject to a filing management system, and not an approval management system.
“Filing notices will then be issued by the relevant authorities within a short and predetermined time frame.”
It is understood that if an investment is in a non-sensitive and high-priority sector, and with an investment outflow from China of less than US$200 million, the transaction is merely subject to a filing management system at the provincial, instead of central, level.
“Hence, the process is expected to be expeditious in obtaining the filing notice. Any submission made earlier is not meaningful in view of possible material changes to the final transaction documentation and content of the original submission, which will require another set of filing to the relevant authorities,” said a source.
It is believed that Orient Excellent is “confident of completing the domestic filing process and remitting the required funds out of China to complete the transaction without any issue”.
The question now is whether Khazanah’s board, which includes Prime Minister Tan Sri Muhyiddin Yassin, Finance Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz, and International Trade and Industry Minister Datuk Seri Mohamed Azmin Ali, has been made fully aware of these options and complexities before a decision is made. – The Vibes, January 29, 2021
