Epistar to acquire Formosa Epitaxy through stock swap

China-based Sanan Optoelectronics will become a major shareholder in Epistar, assuming the merger closes as planned at the end of 2014.

Epistar to acquire Formosa Epitaxy through stock swap
Epistar to acquire Formosa Epitaxy through stock swap

China-based Sanan Optoelectronics will become a major shareholder in Epistar, assuming the merger closes as planned at the end of 2014.

Epistar and Formosa Epitaxy (Forepi), both LED chip manufacturers in Taiwan, have announced plans to merge through a stock share exchange with the acquisition set to close at the end of 2014. Forepi shareholders have approved what is essentially an acquisition by Epistar, with Epistar issuing 117 million new shares to exchange for Forepi shares at a ratio of one Epistar share to 3.448 shares of Forepi.

Epistar to acquire Formosa Epitaxy through stock swapEpistar to acquire Formosa Epitaxy through stock swap

The move comes as Epistar is reported to be at capacity in its LED fabs and the additional Forepi capacity will allow the company to remain as the largest manufacturer, measured by equivalent 2-in. wafers, of LED chips globally. Ironically, it had been speculated that China-based Sanan Optoelectronics would become the largest wafer manufacturer this year, although the Forepi acquisition will likely keep Epistar in the top position. Sanan had become a large shareholder in Forepi back in 2012 and will now assume share ownership in Epistar.

Both Epistar and Sanan are primarily focused on manufacturing LED chips and neither directly offers packaged LEDs. Luminus Devices, a recent Sanan acquisition, does package Sanan chips for sale globally.

The China Post reported that Sanan would be the second largest shareholder in Epistar after the merger. But the terms of the agreement will prevent Sanan from disrupting operations in the near term with the incumbent board of directors set in place for two years.

Epistar expects its market capitalization to exceed NTD 11 billion ($370 million). The Epistar workforce will grow to near 7000 employees. Epistar said synergy and integration of the two organizations will require six to twelve months.

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