Lite-On Technology's increased size after merging with three other Lite-On group companies will better position it to tap the international equities market, according to the merger's lead adviser. Announced June 10, the merger combines monitor and PC system manufacturer Lite-On Technology, power supply maker Lite-On Electronics, mobile phone maker GVC and PC peripheral maker Silitek. Lite-On Technology will be the surviving company.
Lite-On said it expects to reap cost savings to the tune of NT$3 billion a year from consolidated procurement. The enlarged economies of scale in operations will also mean firmer profits as revenues accelerate, which the company predicts will grow at 30% annually to NT$450 billion in 2004.
Y.T. Du, chairman of Salomon Smith Barney in Taiwan, which advised Lite-On on the deal, said the merged company's share capital, at NT$19.1 billion, will increase foreign equities interest in the stock in a step forward to become a world-class company. Its post-merger market capitalization, at NT$103.5 billion, makes it Taiwan's third-largest IT company.
In the past, the small share capital of Lite-On Electronics had discouraged some fund managers from building sizable positions in the stock despite the company's strong balance sheet and decent growth prospects.
However, other analysts have expressed skepticism about the deal, citing the cross-holdings of Lite-On group companies and lack of transparency in their financial dealings. They also questioned Lite-On's cost-cutting targets, as the group's member companies had long done part of their procurement together.
On June 11, shares of the Lite-On Group's four companies fell their 7% daily limit on heavy selling by local brokerage firms.