Private equity giant Carlyle Group made a splash in Taiwan with the announcement of the acquisition of ASE, the largest semiconductor testing and assembling company in Taiwan. Private equity firms are the new kings in financial markets all over the world. There are plenty of merits for a public firm to go private. For one, they can avoid more and more tedious filing requirements. Private firms are also free from Wall Street's myopic analysts. It is not new for American private equity firms to purchase Taiwanese companies, but Carlyle's move signifies another burden faced by Taiwanese companies: restriction of investments in China. ASE is said to get around the 40% rule by selling itself to Carlyle and becoming an American company.
The 40% rule says that Taiwanese public companies cannot invest more than 40% of their equities in China. It is obviously a political decision since China is still hostile toward Taiwan. China has more than 800 missiles targeting Taiwan. Sadly, a model I am currently working on says that the restriction doesn't work. I'll post another one once my model is finished.
I am not satisfied with the explaintion why ASE wanted to be acquired. I am more inclined to believe that many of Taiwanese companies are undervalued at Taipei Stock Exchange and private equity firms just can't pass on these good deals. It is a wakeup call for the officials regulating financial markets in Taiwan. If they don't do something about it, i.e. becoming more transparent and less restrictive, the number of companies they are overseeing will shrink at a very fast rate.
Commodore Matthew Perry brought the Black Ships to Japan in the 19th centurty. Instead of being wiped out from the earth, Japanese determined to reform and had successfully transformed the nation into a world power under Emperor Meiji. Black Ships literally triggered the modernization of Japan. Guess where Commodore Perry was from? United States! Do you see the Black Ships coming, people in Taipei?
(Picture: www.wikipedia.org)
No comments:
Post a Comment