An Open Letter to SPIL Shareholders from ASE (No. 2)
To the Honorable Shareholders of Siliconware Precision Industries Co., Ltd.:
We would like to report the successful results of our tender offer (the “Tender Offer”) for common shares (the “Common Shares”) and American depositary shares (the “ADSs”) of Siliconware Precision Industries Co., Ltd (“SPIL”). The aggregate number of shares validly tendered and not withdrawn in our Tender Offer represented approximately 36.83% of the issued and outstanding share capital of SPIL, which far exceeded the offer cap of approximately 24.99% of the issued and outstanding share capital of SPIL. We would like to express our sincere gratitude for the support we received from those of you who participated in our Tender Offer. The results of our Tender Offer provide a market view affirming that our price was a fair one, and also affirm our original belief that the market sees the compelling rationale for our investment and the future collaboration between SPIL and ASE, in a manner consistent with all applicable laws and taking into account the rights and interests of SPIL’s shareholders and employees.
Unfortunately, SPIL announced that it planned to form a strategic alliance with Hon Hai Precision Industry Co., Ltd. (“Hon Hai”) by issuing to Hon Hai new Common Shares through a share exchange (the “Hon Hai Share Exchange”) and called an extraordinary shareholders’ meeting (“EGM”) to consider (i) the proposed amendments to SPIL’s Articles of Incorporation (e.g., the increase in SPIL’s authorized share capital) (the “AOIs Amendment”) and (ii) the proposed amendments to SPIL’s Procedures for Acquisition and Disposal of Assets (the “Acquisition and Disposition Procedures Amendment”). As indicated in our open letter to SPIL shareholders dated September 28, 2015, as a shareholder of SPIL, we believe that the Hon Hai Share Exchange and the EGM proposals are detrimental to the rights and interests of shareholders.
First, the reasonableness of the implied price of SPIL’s shares to be issued in the Hon Hai Share Exchange is highly questionable. The implied price of SPIL’s shares to be issued in the Hon Hai Share Exchange (NT$35.85) is not only below our Tender Offer price (NT$45.00), but also significantly below the bottom end of the value (NT$48.91) determined by SPIL’s independent appraiser in a fairness report issued on August 28, 2015. The implied price of SPIL’s shares to be issued in the Hon Hai Share Exchange is also lower than SPIL’s share price on the date SPIL first announced the proposed Hon Hai Share Exchange (NT$39.50).
Second, in practice, there are various ways for companies to enter into strategic alliances that do not involve diluting their shareholders. Why did SPIL have to issue a large amount of new shares at a deep discount solely for the purpose of entering into a strategic alliance? The Hon Hai Share Exchange will not bring any cash to SPIL or SPIL shareholders. Instead, it allows Hon Hai to become SPIL’s largest shareholder through SPIL’s issuance of new shares amounting to approximately 21.24% of its share capital under Article 156 of the Company Act of the Republic of China. The Hon Hai Share Exchange, if consummated, will be dilutive to ALL SPIL shareholders equally. It is questionable whether the Hon Hai Share Exchange is in the best interests of SPIL, or is consistent with the general principle of “proportionality” under civil law.
Third, SPIL intentionally disenfranchised ASE (a major shareholder holding 24.99% of outstanding and issued share capital of SPIL) and deprived ASE of the opportunity to voice a view to SPIL shareholders and to protect the interests of shareholders. It is evident from these actions that SPIL’s management team did not seriously take into account the interests of all shareholders. For example, shortly after entering into a non-binding letter of intent for the strategic alliance with Hon Hai, SPIL chose a meeting date of October 15 for the EGM, and selected September 16 as the first day for the book closure period of the EGM for SPIL’s shares (as such, the record date for the EGM is September 15). This approach was designed to disenfranchise ASE, which will not be able to vote its 24.99% stake in SPIL. SPIL’s Board of Directors has failed to take into account the rights and interest of its shareholders when it evaluated the legality, necessity and appropriateness of the Hon Hai Share Exchange.
Fourth, as of today, SPIL has yet to fully disclosed the Strategic Alliance and Share Exchange Agreement as required by United States disclosure rules. How can SPIL shareholders properly exercise their voting rights at the EGM without having access to the actual content of the Strategic Alliance and Share Exchange Agreement?
Finally, SPIL only needed to increase its authorized capital from 3.6 billion shares to approximately 4.2 billion shares to effect the Hon Hai Share Exchange (such amount is adjusted to include the shares issuable upon the conversion of SPIL’s offshore convertible bonds). Why was it necessary for SPIL’s Board to propose to amend its Articles of Incorporation to significantly increase its authorized capital to 5 billion shares? If SPIL shareholders approve this proposal, the Board of Directors of SPIL can, without prior approval from its shareholders, issue additional shares representing approximately 25% of the issued and outstanding shares of SPIL, which could potentially significantly dilute all shareholders up to a maximum of 60.44% of their shareholding.
We believe that the interests and rights of all SPIL shareholders should always be the top priority of SPIL’s management. If you held SPIL’s shares on September 15, 2015, we urge you to consider the reasons listed above, attend the EGM to exercise your shareholder rights and vote “AGAINST” the “AOIs Amendment” (to approve the increase in authorized share capital) and the “Acquisition and Disposition Procedures Amendment”.
Wishing all SPIL shareholders go od health and all the best,
Advanced Semiconductor Engineering, Inc.
 Calculated based Hon Hai’s ex-dividend share price on September 3, 2015 (NT$83.90) divided by the share exchange ratio of 2.34.
About ASE, Inc.
ASE, Inc. is the leading global provider of semiconductor manufacturing services in assembly and test. Alongside a broad portfolio of established assembly and test technologies, ASE is also delivering innovative advanced packaging and system-in-package solutions to meet growth momentum across a broad range of end markets, including 5G, AI, Automotive, High-Performance Computing, and more. To learn about our advances in SiP, Fan-out, MEMS & Sensor, Flip Chip, and 2.5D, 3D & TSV technologies, all ultimately geared towards applications to improve lifestyle and efficiency, please visit: aseglobal.com or follow us on Twitter: @aseglobal.