Taipei--Terry Gou (???), chairman of Taiwan-based manufacturing giant Hon Hai Precision Industry Co. (??), pledged a large chunk of Hon Hai shares with banks in January in exchange for loans, according to data released by the Taiwan Stock Exchange (TWSE) Saturday.
Analysts said that the loans newly secured by Gou are likely to be used to carry out Hon Hai's plans to build flat panel plants in Guangzhou in China's Guangdong Province and in the United States.
The TWSE data shows that Gou provided a total of 430 million Hon Hai shares as collateral to the Taipei branch of Switzerland-based banking group UBS, Cathay United Bank (????) and Taishin International Bank (????) Jan. 3. As required by local regulations, Gou reported the share collateral to the TWSE Jan. 6.
Based on Hon Hai's Jan. 3 closing price of NT$84.3 (US$2.73), the 430 million shares were valued at around NT$36.25 billion, and market analysts estimated that Gou has secured around NT$21.75 billion from the three banks, since borrowers can get loans worth 50 percent-70 percent of the collateral.
Currently, Gou owns about 2.12 billion Hon Hai shares. The latest pledge for loans made Gou's collateral of Hon Hai shares total around 1.1 billion, accounting for about 52 percent of his total shareholdings, the TWSE data shows.
At the end of December 2016, Gou signed an agreement with the Guangzhou authorities to invest 61 billion Chinese yuan to build an advanced 8.5-generation flat screen complex focusing on organic light-emitting diode (OLED) screen production.
The planned Guangzhou plant will be owned by Osaka-based Sakai Display Products Corp. (SDP), a joint venture between Gou and Japan's Sharp Corp., in which Hon Hai holds a 66 percent stake.
At present, Gou owns a 53.05 percent stake in SDP after he raised his stake last year.
Gou has also been planning to build a flat screen plant in the United States in a bid to take advantage of geographic proximity to its clients. Apple Inc. is one of Hon Hai's major clients, which accounts for about 40 percent of the Taiwanese firm's revenue. Gou has estimated that the future flat panel factory in the U.S. could cost Hon Hai more than US$7 billion and is expected to employ 30,000-50,000 people. He said that the Guangzhou and the U.S. investment plans could proceed at the same time.
According to media reports in China, the Guangzhou plant is scheduled to break ground on March 1 after SDP has bought a large piece of land for the construction for 989 million yuan.
On Saturday, shares of Hon Hai fell 0.11 percent to close at NT$89.90 on the Taiwan Stock Exchange, where the weighted index ended up 0.24 percent.
Source: Focus Taiwan News Channel