TPK Technology may reach a final acquisition agreement with JDI before the end of the year

It is reported that Taiwan's touch panel manufacturer TPK recently stated that it will make a final decision on reaching an investment agreement with Japan Display (JDI) before the end of the year.

       Previously, in April, TPK announced that it would sign a letter of intent with Suwa Investment Holdings LLC (hereinafter referred to as Suwa). According to the letter of intent, TPK intends to participate in JDI's private placement capital increase through Suwa, with TPK's investment capped at US$230 million. In addition, TPK will also sign another LCD business cooperation agreement with JDI.

       TPK explained that the purpose of investing in this case is to strengthen upstream and downstream cooperation and vertical integration of the touch and display industry supply chain to enhance the overall efficiency of production and new technology development; and to expand the penetration rate of touch screens in the automotive electronics market and expand the customer base.

       TPK said that according to the current plan, Suwa expects to invest 60 billion yen in JDI, of which 42 billion yen will be used to subscribe for JDI common stock at a subscription price of 50 yen per share. It is expected to acquire 49.82% of JDI's equity and subscribe for JDI's convertible corporate bonds with 18 billion yen.

       In addition, TPK also said that Suwa may subscribe to an additional 20 billion yen of JDI convertible corporate bonds in the future based on JDI's operational needs.

       Market speculation has been growing that the acquisition talks may have reached a deadlock as sources from the consortium revealed in early May that they would further evaluate JDI's business prospects before signing a final agreement.

       In addition, the Asahi Shimbun quoted multiple sources earlier on the 18th that the China-Taiwan Alliance, which is composed of Taiwan's TPK, Fubon Tsai family private company and China Harvest Technology Investment Management Company, found that JDI's operating conditions were worse than expected during the review of JDI's assets, so it required the addition of new investors, and this new investor must invest tens of billions of yen, otherwise the Taiwan-China Alliance may terminate the negotiations. It is understood that JDI is seeking investment from several foreign investment funds, but has not yet found a new investor. The Japanese public-private fund INCJ, which is a major shareholder of JDI, is also hesitant to further support JDI. If JDI fails to complete the negotiations with the China-Taiwan Alliance, it may face bankruptcy within two months.

       Michael Chiang, chairman of TPK, denied the rumor, saying the review process would not take too long and expected a decision by the end of the year.

       Commenting on the outlook for the touch panel industry, Chiang said that 2019 will be a difficult year for the entire industry and TPK, and the company's sales will not grow significantly this year. However, the company will redouble its efforts to maintain profitability. In the first quarter of 2019, the company made a profit of NT$192 million (US$6.139 million).

       As of now, the final move of JDI's financial backers remains unclear. On May 19, Japanese media reported that JDI was rumored to need to find new investors to join the bailout, otherwise the Chinese mainland and Taiwan alliance might not invest. Although JDI has denied this report, it also highlights that this transaction has added variables and the prospects are even more uncertain.