AUO Sells Taichung Plant to TSMC for NT$38.8bn

AUO, the Taiwanese display maker, is selling the buildings, cleanrooms and facility equipment at its Taichung Phase II plant to TSMC for NT$38.8bn before tax, according to filings both companies made on Taiwan’s Market Observation Post System (MOPS) on 29 October. AUO expects to book a gain of about NT$18.5bn on the sale.

In a separate filing moments later, AUO said it had called off a NT$19.7bn deal, approved by its board on 28 July, to sell its Huaya plant to Quanta Computer. The two sides could not agree on how the plant would be used or when it would be handed over.

What TSMC is buying

The site is in the Anlin section of Xitun District, Taichung, and covers nine registered buildings. AUO’s filing gives a registered floor area of 429,030.19 square metres, about 129,782 ping (the Taiwanese unit of roughly 3.3 square metres), with a usable area of about 166,000 ping. Cnyes reported that the Phase II site includes a fifth-generation and a 7.5-generation panel plant.

AUO’s board approved the sale on 29 October, a day after its audit committee signed off. TSMC’s filing lists no board approval date; it says the purchase was approved the same day under the company’s internal delegation of authority. Both filings describe the other side as an unrelated party and say the price was negotiated, with reference to market rates and professional valuations. DigiTimes put the price at about US$1.2bn.

AUO will be paid in instalments under the property sales contract. Its expected gain of about NT$18.5bn is after transaction costs and estimated taxes. The filings give no completion date.

Why the Quanta deal collapsed

AUO had agreed in July to sell the land, buildings and related facilities at Huaya to Quanta for NT$19.7bn before tax, and expected a gain of about NT$13.39bn at the time. Its supplementary filing on 29 October says that after several rounds of talks the two companies could not agree on the plant’s usage specifications or delivery timing, so AUO’s chairman decided to end the deal. AUO says the termination has no effect on its finances or business. Liberty Times reported that AUO plans to look for another buyer.

The sale was announced on the day AUO reported its third-quarter results. In its results release, the company reported revenue of NT$66.88bn, down 5.7% on the previous quarter, and a net loss attributable to shareholders of NT$2.50bn, or NT$0.33 a share. The release does not mention the plant sale.

What the two filings say, and what they leave out

The filings are unusually specific about price. AUO’s two valuation firms, including Cushman & Wakefield, put the site at NT$38.75bn and NT$38.539bn. TSMC hired two different firms, which valued it at NT$37.3bn and NT$38.8bn. The agreed price matches the highest of the four, so AUO sold at the top of the range, and TSMC paid what one of its own valuers said the site was worth.

They are much less specific about purpose. AUO says it is selling to focus on an asset-light operating model, make better use of its assets and improve its financial structure. TSMC says only that the site will be used for operations and production. It does not say what it will make there, when work will start or how much it will spend fitting out the buildings. Asked by the Central News Agency whether the plant would be used for advanced packaging, TSMC did not answer and repeated that wording.

Buying an existing site with cleanrooms and utilities already in place can be quicker than building from scratch, which matters for a company that keeps adding fabs in Taiwan and has had to halt steel work on construction sites this month after four workers died. It also keeps capacity on the island that already holds most of the world’s advanced chip capacity. For AUO, the expected gain is more than seven times its third-quarter net loss. What neither company has said is how quickly AUO will vacate the Phase II buildings or when the gain will be booked.