Published September 9, 2009

Analysts divided over ATIC-Chartered deal

By JAMIE LEE

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ANALYSTS appear divided on the merits of the $2.5 billion bid from Abu Dhabi's Advanced Technology Investment Company (ATIC) for Chartered Semiconductor Manufacturing.

Mixed views: Nomura analysts see the deal as unfair to minority investors, but an OCBC Investment Research analyst believes that investors should accept the offer

This comes on the back of a lethargic climb yesterday by its shares, which ended up two cents or 0.77 per cent at $2.61. The Straits Times Index closed up 0.64 per cent.

'ATIC's bid looks unlikely to face roadblocks; however, we see the deal as unfair to minority investors,' said Nomura analysts Shailesh Jaitly and Chitra Gopal in a client note.

They said that the offer price of $2.68 per share reflects a mere one per cent premium to the last traded price of $2.66 before the announcement, which did not reflect the improving fundamentals of the loss-making company.

'While acquisition by ATIC would bring strategic benefits to Chartered, we are concerned that the deal is being done a bit too early,' they added.

Chartered - which is 62.3 per cent owned by Temasek Holdings - needs to get votes approving of the sale that total 75 per cent of the shares represented at a meeting.

With Temasek's support of the sale, the deal is unlikely to meet hurdles unless another bid is made, the analysts said. Under the scheme of arrangement, ATIC can also match the competing bid price.

But given the slim chance of a competing bid, investors would be better off accepting the offer, said OCBC Investment Research analyst Kevin Tan.

'Accept the offer,' argued Mr Tan in a report.

'While we have turned increasingly positive on Chartered's growth prospects and the overall semiconductor industry, we caution that the economic outlook remains largely uncertain and volatile.'

Meanwhile, Moody's said Chartered's Ba2 rating is under review for a downgrade to account for the change in ownership.

'Chartered's Ba2 rating has thus far benefited from three-notches of rating uplift due to Temasek's 62 per cent ownership,' said senior analyst Ken Chan.

Despite seeing greater business synergies between Chartered and ATIC's Globalfoundries, Moody's is assessing Chartered's strategic importance to ATIC and its future strategy, he added.