Malaysian firm Rahmat Lim & Partners advised Beijing Integrated Circuit Advanced Manufacturing and High-End Equipment Equity Investment Fund Centre (CGP Fund) on its consortium acquisition with its strategic partner, Malaysian-based company Dagang Nexchange (DNeX), of the entire equity interest of Malaysia’s largest chipmaker, Silterra, from the sovereign wealth fund Khazanah Nasional.
DNeX acquired 60% equity interest in Silterra, while CGP acquired 40% equity interest. Both aim to increase production capacity for the chipmaker and develop its manufacturing capabilities.
“China has a stated objective to boost its self-sufficiency for advanced technologies as a result of geo-political tensions,” Ho Wei Lih, a partner at Rahmat Lim & Partners in Kuala Lumpur, who led the team, told Asia Business Law Journal.
“In the light of such tensions, it is important for China to ensure growth in its economic development, which is highly dependent on the availability of microchips – the semiconductor devices that power everything from refrigerators, cellphones, televisions to electric vehicles. Malaysia is a relatively attractive place of investment to the Chinese, and could well be turned into their Asean platform.”
Ho said CGP had investments in other companies that formed an ecosystem of semiconductor industry players. With Silterra now a part of that ecosystem, it would be able to tap the expertise of the other investee companies and create a market for the chipmaker’s products.
“I believe that the transaction will result in a positive spill-over effect throughout the semi-conductor value chain in Malaysia, comprising companies involved in product design, manufacturing, packaging and assembly, which in turn will strengthen Malaysia’s position in the tech arena in the long run,” said Ho.
Commenting on the challenges with the deal, she said that transaction strategy, regulatory approval and timing were the key. Due to the competitive bidding tension, the CGP-DNeX consortium had to put forward a competitive bid price and equally competitive transaction terms. At the end of the day, how much value the consortium members could bring to turn around the once troubled chip manufacturing plant was the key to their success.
“As CGP directly purchased the 40% shares in Silterra from Khazanah, CGP also participated in the negotiation of the transaction documents with Khazanah,” she said. “The key challenge was for us to persuade Malaysian parties to agree on a set of transaction terms, which also took into account international M&A market practice.”