Tongfang Guoxin to raise $12.6b via private placement

View of the reception desk of Tsinghua Unisplendour on November 19, 2003.The company has taken a minority stake in Western Digital Group for $3.76 billion on Sept 30, 2015.[Photo/IC]

Tongfang Guoxin Electronics Co Ltd, a chip-making unit of State-backed Tsinghua Unigroup, plans to raise as much as 80 billion yuan ($12.6 billion) of additional funds through a private placement.

The company said it will sell 2.96 billion shares at 27.04 yuan each to eight companies and its employees, in what is likely to be the biggest fund-raising in the A-share market.

Shares of Tongfang Guoxin, which were suspended from trading for nearly a month, surged by the 10 percent limit to 35.96 yuan after resuming trading on Friday.

Among the eight companies which will buy the additional shares, six are subsidiaries of Unigroup, which is a unit of Tsinghua Holdings Co Ltd, a technology conglomerate backed by Tsinghua University. Tsinghua Holdings will remain the controlling shareholder after the deal, the company said.

From the amount raised, about 60 billion yuan will be used for building a memory chip plant. Tongfang Guoxin also plans to acquire 25 percent shares in Taiwan-based Powertech Technology Inc for 3.79 billion yuan, and buy upstream and downstream companies in the chip industry chain for about 16.2 billion yuan.

The building of a new memory chip factory indicates that Tsinghua Unigroup is entering the mainstream area of memory chips.

Earlier this month, Tsinghua Unigroup agreed to buy a 7.012 billion yuan stake in Tongfang Guoxin from Tsinghua Tongfang Co Ltd, which is also held by Tsinghua Holdings.

"The chip industry is one of the strategic focus areas for Unigroup. Tongfang Guoxin is the sole listed chip company under its umbrella, and we aim to build Tongfang Guoxin into a world-class chip giant," the Beijing-based company said, without disclosing further details.

In September, Tsinghua Unigroup announced plans to buy a $3.8 billion stake in Western Digital Corp, an American computer data storage company, which, if approved, would become the single largest Chinese investment in a US firm till date.

Tsinghua Holdings is restructuring its businesses through equity replacement and cross-shareholding, and will concentrate on its integrated circuit and chip manufacturing operations for Tsinghua Unigroup, analysts said.

Wu Lianfeng, an analyst with research firm IDC Consulting Ltd, said the additional issue of shares by Tongfang Guoxin shows that the country plans to boost investment in the chip industry, and is determined to transform it into a technology giant in the long run.