KKR and Chairman in Bid to Take Yageo Private

Kolhberg, Kravis & Roberts and the chairman of Taiwan's Yageo Corporation have launched a bid to take the electronic-components manufacturer private in a deal that values the company at $1.6bn.

The deal, one of the biggest private equity purchases in Taiwan in recent years, comes as technology companies are re-examining their supply chains and seeking out alternative suppliers after the devastating Japan earthquake and tsunami.

Yageo, the world's biggest producer of chip resistors and the third-biggest producer of ceramic capacitors, has both Japanese competitors and suppliers, though the company said there had been no major shift in orders away from Japan, nor had its business been disrupted by supply chain problems.

KKR and Pierre Chen, who founded Yageo in 1977, have offered to acquire all of Yageo's Taiwan-listed shares for T$16.10 each, a 14 per cent premium to Yageo's last closing share price. Mr Chen and KKR collectively control 34.3 per cent of Yageo's shares. After the deal, Mr Chen be Yageo's biggest shareholder with a 55 per cent stake, while KKR will take the remaining 45 per cent.

KKR first invested in Yageo in 2007 with a $250m convertible bond purchase that gave an effective 20 per cent stake in the company.

"From a long-term perspective, the new shareholding structure will enable investments in accelerated high-end product development and deeper penetration into western markets," Mr Chen said in a statement

While little known outside of specialised tech circles, Yageo's products which belong to a broad category called "passive components" go into nearly every type of electronic device, from consumer products including smartphones and laptops to industrial machines and appliances such as air conditioners.

Yageo dominates the market for chip resistors, where most of its competitors are other Taiwanese companies, with a 25-30 per cent market share. It is also a major player in the so-called multi-layer ceramic capacitors market, where it is third following Japan's Murata and Semco, a subsidiary of South Korea's Samsung.

UBS advised KKR and Mr Chen in the deal.