Taiwan blocks $1.6bn KKR deal

A Taiwanese regulatory body has blocked the KKR-backed buyout of electronics company Yageo and barred KKR and Yageo CEO Pierre Chen from making another offer for the company for at least one year.

Taiwan’s Investment Commission has blocked the management buyout of Yageo Corporation backed by private equity heavyweight Kohlberg Kravis Roberts.

According to a statement, the Taiwanese regulator is questioning the deal’s fairness to minority shareholders, the legitimacy of the buyout price and clarity of information disclosed. 

In April, KKR joined Pierre Chen, founder, chairman and chief executive of Yageo, in launching a tender offer to acquire 100 percent of the outstanding common shares of the Taiwan-listed company. KKR itself is already a shareholder of Yageo as it invested $230 million for roughly 16 percent of the company in 2007.

The proposed deal values the electronics company at around TWD47 billion (€1.1 billion; $1.6 billion). The offer price of TWD16.1 per share represents a premium of approximately 14 percent over the closing price of Yageo shares on the Taiwan Stock Exchange as of 1 April, and is equal to the highest closing price since July 2004.

Taiwanese media reports have indicated that the deal was blocked partly because the company’s debt would have amounted to more than two thirds of its total assets after the management buyout. According to the statement released by the Investment Commission, KKR and Chen would have to borrow TWD32.6 billion for the deal.

Under current regulations, Orion, an investment vehicle jointly held by KKR and Chen, is barred from making further bids for the asset for at least a year from now.

“KKR remains committed fully to its investment in Yageo and its partnership with the company's leadership and management. Yageo has established a strong position in its industry, and KKR has full confidence in the ability of Yageo's management to continue to grow the company,” KKR executive Julian Wolhardt said in an email response.

Established in 1977, Yageo has a product portfolio of resistors, ceramic capacitors, ferrites, high frequency products, aluminum capacitors, inductors and others in both commodity and specialty versions. The company has production and sales facilities in Asia, Europe and Americas.