Epistar Buys Into Tekcore to Ease Strained Capacity

Taipei, Oct. 8, 2009 (CENS)--LED epi-wafer maker Epistar Corp. recently announced it will acquire a 19.9% stake in Tekcore Co., Ltd. to gain immediate production capacity to deal with excessive orders, which have strained its in-house production lines.

Epistar's executives stressed that their company has been inundated with orders, leaving the firm no time to wait for deliberate expansions at in-house facilities. They added acquiring a stake in Tekcore would allow their company to gain an immediate capacity and eliminate risk associated with fresh investments in equipment.

For Tekcore, which is rated as Taiwan's No.1 green-LED chipmaker by volume, the deal offers it the chance to enter into the supply chain of TVs using LED as backlight.

The acquisition has ensured Epistar a lucrative capital gain from Tekcore's stock, which soared 60% to close at NT$38.5 on Tuesday (Oct.6). The share price surge has rewarded Epistar with NT$1 billion (US$30 million at US$1:NT$33) given the company will pay Tekcore NT$16.8 per share in the private equity placement.

However, the shares that Epistar acquires will be subject to a lock-up for three years, meaning the chipmaker would not be able to sell the shares in three years, according to relevant trading regulations.

The acquisition makes Epistar the biggest shareholder of Tekcore by replacing LED packager Everlight Electronics Co., Ltd.

After the acquisition, Epistar will have 250 metal organic chemical vapor deposition (MOCVD) chambers, 24 more than it is now operating. Tekcore plans to add three more machines at yearend and seven more in the first half next year to the running 24. Additional capacity would further widen Epistar's distance with No.2 supplier Huga Optotech and No.3 supplier Formosa Epitaxy in the competition.

Blue-chip supplies are falling short even severer because of excessive orders from LCD TV makers for LED backlights. Epistar is currently the world's No.1 blue-chip supplier. Its chairman, B.J. Lee, estimated demand-supply balance would not likely come until 2010.