Chinese chip tycoon says $ 9 billion bailout turns “a crime”

0

(Bloomberg) – Tsinghua Unigroup Co. chairman has vowed to “fight to the end” of a proposal to buy out a secret fund, amplifying an unusually public dispute over the $ 9 billion bailout package. struggling chipmaker.

Bloomberg’s Most Read

Zhao Weiguo, whose company controls 49% of the debt-ridden semiconductor giant, doubles his stake this month against a takeover bid led by JAC Capital. Zhao’s holding company Jiankun now intends to uncover the backers behind JAC, a fund run by recluse financier Li Bin that kept a low profile until his consortium became the successful bidder for Unigroup, the executive told Bloomberg News in an exclusive interview on Tuesday.

The public spectacle surrounding the planned rescue of one of China’s largest semiconductor players has shaken an industry accustomed to meticulously crafted private deals. In a statement released last week, the industry veteran highlighted how the JAC deal valued Yangtze Memory – one of the Tsinghua Group’s main assets – at just 47.9 billion yuan (7.5 billion yuan). dollars), against a deserved valuation close to 160 billion yuan. Zhao claimed in his memo that JAC’s bailout would result in 73.4 billion yuan in loss of state assets.

Zhao’s outcry sparked a public row that state censors have so far allowed to flourish in government newspapers and social media. Tsinghua’s court-appointed custodian on Friday berated Zhao for putting Unigroup in its predicament in the first place, after years of reckless expansion. He added that the bidding process that culminated in JAC’s winning bid was fair and will continue to work with creditors to get the proposal approved at a meeting on December 29.

“The proposed deal is an intention to commit a crime,” Zhao said. “Even if the creditors committee approves the deal, I will fight a legal battle to the end.”

Representatives of Unigroup, court-appointed custodians and JAC did not respond to messages and calls seeking comment.

Read more: China Chipmaker’s largest shareholder told to reject bailout

Zhao’s position threatens to disrupt the Unigroup bailout plan, which has become a national security concern since Xi Jinping advanced a strategy of self-sufficiency in key technologies competing with the United States. mater – remains a pivot in a race for technological supremacy.

It obscures the proposal of JAC, a state-backed semiconductor investment fund, which defeated a rival consortium led by Chinese e-commerce leader Alibaba Group Holding Ltd. -The trading giant’s stock listing in the United States has raised concerns, Bloomberg News reported. U.S. regulators are tightening audit requirements for U.S.-listed companies, which could expose China’s main microchip company to disclosure of sensitive information if it was owned by Alibaba, people familiar with the matter said.

JAC and the private company Wise Road Capital, both controlled by Li, had offered 60 billion yuan ($ 9.4 billion) to repay debts to creditors. The Alibaba consortium, which includes funds backed by the Zhejiang government, had offered a deal worth more than 50 billion yuan to help keep the chipmaker afloat. Any deal would likely include conditions for the restructuring of Unigroup’s roughly 100 billion yuan of onshore and offshore debt, Bloomberg News reported in November.

“I do not regret inviting the government to deal with the Unigroup case,” Zhao said on Tuesday. “There was also no problem at the decision-making level of government.”

Read more: Alibaba’s offer for Unigroup would be a last-minute problem

Unigroup grew rapidly during a decade-long stimulus drive that fueled skyrocketing economic expansion through the use of credit. Unigroup and its subsidiaries embarked on a wave of acquisitions, buying up foreign names including RDA Microelectronics Inc. and Spreadtrum Communications Inc., on their way to Unisoc, China’s most sophisticated 5G chipmaker.

H3C, a joint venture with Hewlett Packard Enterprise Co., is a key supplier of servers to the Chinese government and state-owned enterprises. And in 2017, it unveiled its flagship project: Yangtze Memory, which competes with Micron Technology Inc. and Samsung Electronics Co. for US memory chip giant Micron.

Read more: Secret Chinese committee draws up list to replace US technology

But concern over the scale of China’s resulting mountain of debt prompted a deleveraging campaign from around 2017, choking the borrowing tap. It also coincided with new momentum to restructure the sprawling corporate empires that have sprung up around the country’s top universities, including Tsinghua.

The Chinese semiconductor titan in 2020 defaulted on a bond and in July a court ordered it to review its debt, prompting it to invite strategic investors with deep pockets as well as the ability to manage a significant chip and cloud manufacturing company.

“Unigroup’s high debt load was not enough” to hurt the business, Zhao said. But a confluence of factors, including pressure on academic institutions and Covid-19, has scared creditors. “There’s no reason I can’t win this case.”

Read more: Alibaba Unveils One of China’s Most Advanced Chips

Bloomberg Businessweek Most Read

© 2021 Bloomberg LP

Share.

Comments are closed.