ChipMOS corporate streamlining. Disclaimer: I don't in any way represent the company, and you can feel free to regard this as conjecture. Also feel free to correct any mistakes I've made. I hope that ChipMOS will soon post an official explanation of the process on their web site.
ChipMOS TECHNOLOGIES is undergoing a process of corporate streamlining in order to better serve its shareholders. ChipMOS believes that by reducing the complexity of its corporate structure it will be able to achieve a better valuation for the company. It will also have more ready access to the cash in its subsidiaries, which is currently restricted, allowing it to give significant annual dividend payments.
ChipMOS TECHNOLOGIES (Bermuda) LTD. ("ChipMOS") is listed on the NASDAQ under the ticker symbol IMOS. ChipMOS is a Bermuda-based holding company which owns approximately $28 million and 84.22% of ChipMOS Taiwan, with the remainder of ChipMOS Taiwan owned by Siliconware Precision Industries (SPIL). ChipMOS Taiwan owns 100% of ChipMOS USA as well as 42.87% of ThaiLin. ThaiLin owns 100% of Modern Mind, which in turn owns 100% of ChipMOS Shanghai. ThaiLin also owns 4,474,211 shares of ChipMOS Bermuda (IMOS).
At the end of the corporate restructuring process, ChipMOS expects to be a single company listed on the primary Taiwanese stock exchange. Current IMOS shares listed on the NASDAQ will remain on the NASDAQ, but become ADRs of IMOST listed in Taiwan.
Milestones in the corporate streamlining process:
- June 14, 2011, ThaiLin shareholders approved the purchase of Modern Mind (subsidiary of ChipMOS Bermuda, and 100% owner of ChipMOS Shanghai) from ChipMOS Bermuda for $40 million.
- October 26, 2012, ThaiLin and SPIL took part in a secondary offering of ChipMOS shares. This was a necessary step in order to satisfy listing requirements in Taiwan. ThaiLin sold 2 million of its 6,474,211 shares, leaving it with 4,474,211 shares of IMOS. SPIL sold 800,000 of its 3,043,749 shares, leaving it with 2,243,749 shares of IMOS as well as 15.78% ownership of ChipMOS Taiwan. Including the shares held by partially owned subsidiary ThaiLin, there are nearly 34 million shares of ChipMOS (IMOS).
- March or April, 2013, ChipMOS will sell a fraction of 1% of its ownership of ChipMOS Taiwan on the Emerging Markets exchange in Taiwan, and this will become IMOST. The offering may be for as little as 1.5 million shares of ChipMOS Taiwan out of 840 million shares, of which ChipMOS owns 84.22%. A 6 month listing on the Emerging Markets exchange is a prerequisite for listing on the primary Taiwanese exchange. It is expected that the offering price will be equivalent to a price significantly higher than IMOS is at.
- Fourth quarter, 2013, ChipMOS will sell enough shares of ChipMOS Taiwan to get down to approximately 68% ownership. It is expected that the price would be very significantly higher than the current equivalent price for IMOS. IMOS shares listed on the NASDAQ will become ADRs (currently, 1 IMOS share would be equivalent to approximately 20 IMOST shares). The IMOS shares held by ThaiLin would be purchased by ChipMOS, reducing the share count. Other shares, owned by dissenting shareholders, might also be purchased by ChipMOS. Unspent money held by ChipMOS Bermuda might be given to shareholders of IMOS as a dividend.
- Fourth quarter, 2013, or early 2014, ThaiLin will fully merge with ChipMOS Taiwan, becoming 100% owned by the company. All of ChipMOS would be listed on the Taiwanese stock exchange, including the portion owned by SPIL, and all subsidiaries would be wholely owned. The bulk of IMOST, listed in Taiwan, would be held as ADRs on the NASDAQ under IMOS.
- ChipMOS is currently extremely undervalued when compared with its peers in Taiwan, with IMOS shares worth a third or less of what they would receive on the Taiwanese exchange when measured by metrics such as free cash flow, book value, and earnings. Both the Taiwanese and US listed shares should rise to meet those of comparable companies in the industry.
- Greater exposure. ChipMOS has close to 6,000 employees and is well known in Taiwan, but almost unknown in the US where 62% of its current shareholders are located. ChipMOS is covered by 2 analysts in the US. By contrast, Chipbond, a smaller company by revenue but with a similar business, is covered by around 17 analysts in Taiwan.
- Dividends. ChipMOS has reached a net cash position and is becoming very profitable. Taiwanese companies must pay an additional 10% tax on profits that are not dividended to shareholders, but with the current corporate structure dividends are more difficult and costly to implement. ChipMOS anticipates dividending more than half of annual profits to shareholders in future years.