China fund buys Magnachip for $1.4bn

A China-backed fund has bought Magnachip Semiconductor in Korea for $1.4bn

Magnachip Semiconductor in South Korea has been bought by a China-backed fund for $1.4bn in cash. The company has four fabs in Korea making power chips and LED drivers, with revenues of $299.1m in 2020.

The deal is with South Dearborn Limited, a company incorporated in the Cayman Islands, and Michigan Merger Sub, a Delaware corporation, both of which are investment vehicles established by Wise Road Capital and certain of its limited partners.

Wise Road is part of the consortium that bought NXP’s discrete power and logic chip maker Nexperia in 2017, headquartered in the Netherlands, but sold its stake to Wingtech in 2018. Last year, Wise Road also acquired Huba Control, a Swiss sensor specialist for industrial pressure and flow measurement, from Siemens. Wise Road also has a sensor joint venture with Austrian chip maker ams.

Magnachip shareholders will receive $29.00 in cash for each share, a premium of approximately 75% to Magnachip’s 3-month volume-weighted average share price, given its 2020 revenue.

Magnachip was the non-memory spin off of five fabs from Hynix, now SK Hynix. Exactly a year ago, it annnounced the sale of its foundry business and a 200mm fab to SK Hynix. After the Wise Road deal, the management team and employees are expected to continue in their roles, and the company will remain based in Cheongju, Seoul and Gumi, South Korea.

“This transaction is in the best interests of all of our stakeholders, including shareholders, customers and employees,” said YJ Kim, CEO of Magnachip. “It will provide an excellent opportunity to accelerate our MX 3.0 growth strategy. Given their deep industry expertise, Wise Road Capital is an ideal partner for Magnachip, and we look forward to working with them as we chart the next phase for our company. We remain grateful to our customers for their trust and to our fellow employees for their unwavering commitment to delivering industry products to customers worldwide.”

Wise Road says it intends to work together with Magnachip’s management team to boost the display and power chips using its international network. The deal is expected to close during the second half of 2021, subject to closing conditions and regulatory approvals.