ATIC to purchase chip maker

The Dh14bn deal to acquire a computer chip maker controlled by the Singapore government is part of growing ties between the UAE and Asian nations.

Abu Dhabi's Advanced Technology Investment Company (ATIC) says it will acquire a computer chip maker controlled by the Singapore government in a transaction valued at S$5.6 billion (Dh14.36bn) in cash and debt. ATIC will pay S$2.68 for each Chartered Semiconductor Manufacturing share, a 14 per cent premium to their average price over the past month. The deal is subject to approval by Chartered Semiconductor shareholders and the Singapore High Court. When the acquisition is completed, Chartered Semiconductor will be merged with Globalfoundries, the chip manufacturer that ATIC runs in a joint venture with the US chip company AMD. Temasek Holdings, the Singaporean sovereign wealth fund that owns 62 per cent of Chartered stock, has already approved the sale, the companies said. "What we plan to do is go through an intense integration planning period in the coming months, before commencing on the operational integration when the deal is completed," said Ibrahim Ajami, the ATIC chief executive. "We expect it to take six to 18 months to fully execute on the synergies between Chartered and Globalfoundries." If approved, the deal would be completed by ATIC International Investment Company, a subsidiary of ATIC, in the fourth quarter. Doug Grose, the chief executive of Globalfoundries, will head Chartered following the deal, and his leadership team were key players in the acquisition, Mr Ajami said. "They have been very involved all the way through, and formed a critical part of the diligence team." The deal is the latest chapter in Abu Dhabi's efforts to diversify its economy away from oil and lure newer, high-technology industries to the emirate, analysts said. Chartered Semiconductor has struggled to turn a profit in recent years and has long been viewed as a troublesome part of Temasek's investment portfolio. AMD, which spun off its manufacturing system into the ATIC-controlled Globalfoundries and is 20 per cent owned by Abu Dhabi's Mubadala Development, has also been routinely in the red. Mr Ajami said the remedy for Chartered Semiconductor was the boost in scale and resources that would come from its integration into Globalfoundries, and the backing of a strategic investor. "This is not just about Chartered, this is about building the value that comes from the complementary nature and synergies between the two companies," he said. "This industry is a scale game." The investment also underscored a growing effort by the UAE and Asian nations such as Singapore to build investment and trade ties to offset their dependence on the West, which the global financial crisis has exposed as a major economic vulnerability. "It emphasises the growing sophistication of commercial ties in the region beyond simply oil and cheap consumer goods," said Ben Simpfendorfer, an economist at RBS in Hong Kong and author of The New Silk Road: How a Rising Arab World is Turning Away from the West and Rediscovering China. "It also underscores that the economic crisis has not stalled the rise of the new Silk Road." ATIC is spearheading Abu Dhabi's aim of diversifying the emirate's economy into more value-added businesses that reduce its dependence on oil exports. Making semiconductors requires access to cheap and reliable power, something Abu Dhabi can easily provide. But Globalfoundries does not yet have any plants in Abu Dhabi. The company owns a plant in Germany and is building another in the US state of New York. It has said it may build a semiconductor fabrication plant in the capital, but such facilities, called wafer fabs, can cost more than US$3bn (Dh11bn) to build. With its purchase of Chartered, Globalfoundries would immediately gain six wafer fabs in Singapore and a $1.7bn-a-year company with 5,500 employees in seven countries. "I think it's a smart move," said Daniel Heyler, a regional semiconductor analyst for Bank of America-Merrill Lynch in Hong Kong. "Chartered has good partners and good technology, and needs funding." [e-mail] [e-mail]