Chinese PE firm pays $1.4 bn to take over Magnachip Semiconductor

South Korean chipmaker Magnachip Semiconductor Corp. announced on Mar. 27 that it has entered into a definitive agreement to be acquired by China-based private equity firm, Wise Road Capital, in a take-private transaction valued at around $1.4 billion.

Under the agreement, Magnachip’s existing shareholders will receive $29 in cash for each of the company's common shares, representing about a 75% premium to the company's three-month weighted average share price.

Magnachip’s board of directors unanimously approved of the agreement and recommended the company's shareholders vote in favor of the deal, which may wrap up as early as the second half of this year.

The buy-side plans to delist the company from the New York Stock Exchange upon kicking off the sale process. The company's headquarters will remain in Korea after the sale concludes.

The deal's advisors included JP Morgan and domestic law firm Kim & Chang on the sell-side; and BMO Capital Markets and local law firm Lee & Ko on the buy-side.

Meanwhile, some industry watchers say the deal may require approval by related ministries such as Korea's Ministry of Trade, Industry and Energy (MOTIE) since non-memory chips may be included on Korea’s core technology list.

Under the country's Industrial Technology Protection Act, companies that hold technology designated as a national core technology are subject to the trade ministry's approval when exporting a national core technology or being acquired by a foreign firm.

Wise Road Capital is a China-based PE firm specialized in semiconductors, mobile, automotive applications and robots. Its portfolio includes semiconductor firm Nexperia, mobile chip and solution firm JLQ and smartphone manufacturer Huaqin.

Magnachip is a system chip company with a forte in OLED display driver integrated circuit (DDIC) chips and power solutions. It is the world’s leading firm in the OLED DDIC chip market for non-captive companies. The company has been beefing up the development of automotive power solutions, which have been experiencing a shortage of late.

Previously, the company ran a foundry operation but sold it last year to a consortium led by domestic PE firms Alchemist Partners and Credian Partners. SK Hynix also participated in the deal indirectly by investing in the special purpose company established by the consortium.

Write to Jun-ho Cha at chacha@hankyung.com
Danbee Lee edited this article.