Home » Geopolitics » Spreadtrum is to be acquired by a Chinese high-tech investment enterprise owned by the state and also belonging to the leading Tsinghua University with microelectronics research interests

Spreadtrum is to be acquired by a Chinese high-tech investment enterprise owned by the state and also belonging to the leading Tsinghua University with microelectronics research interests

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Core information:

The top 10 SoC design enterprises of Mainland China had US$3.8B revenue in 2012. Out of that Spreadtrum had US$725.2M which is not less than 19%. On the ‘Experiencing the Cloud’ I’d reported extensively on the reasons:

It is also notable that this (together with MediaTek offerings) lead to Qualcomm’s SoC business future is questioned first time [May 1, 2013].

Update: TrendForce: Mediatek and Spreadtrum Advance in China Market while Qualcomm’s Chip Usage Declines [press release, June 27, 2013]

Mediatek has been making an impressive run lately; not only is the Taiwan-based chip manufacturer commanding its way in the mid-to-high end smartphone space, it has also successfully penetrated the 4G mobile market thanks to its recently announced 4G chip. According to the latest statistical data compiled by TrendForce, a global market research firm, Mediatek’s processors have been used by over 50% of China’s branded smartphones since the MT6575 chip was introduced in 2012. Due in large part to factors such as high pricing and the lack of hardware and software compatibility with various Chinese-made devices, Qualcomm’s chip usage rate has been gradually declining in China, and shrunk to as low as 33% in 2013. With Qualcomm and Mediatek both devoting their attention towards the mid to high end smartphone consumer segment, much of the low-end smartphone space has been left to Spreadtrum, which has recently unveiled a processor intended for low end hardware devices. In 2013, Spreadtrum’s chip usage rate in the Chinese market grew to approximately 11%.
imageFigure-1 2013 Smartphone processor market share in China’s smartphone market
Source: DRAMeXchange, June, 2013

Despite being an indisputable leader in the high end smartphone market, Qualcomm’s MSM8X30, MSM8X26, and MSM8X25Q processors are still facing a lot of stiff competition in the low-to-mid end mobile sectors. A way Qualcomm may reverse its struggles in China is by taking advantage of the country’s rapidly growing 4G/LTE developments. The company will have a good chance of emerging as a major LTE market leader should China’s 4G business opportunities appear early next year.  

Although Mediatek has generally been known to promote two new items on an annual basis, this year the Taiwan-based company has chosen to break away from tradition by announcing a total of four different products. The first –the MT6589– was announced during 1H13, and is intended for the mid-to-high end smartphone market; the remaining three products—all of which are smartphone chips—are expected to be introduced at some point during 2H13. Among the new processors, the duo core, Cortex A7-based MT6572 chip stood out as particularly noteworthy given its potential to exert a lot of impact on the low end smartphone market. The said chip is unique in that it supports China’s TD SCDMA system, is priced in a notably affordable range, and sports a good degree of compatibility with various low cost components (which could help push manufacturing costs down to as low as $US 40). All in all, this chip provides a perfect opportunity for Mediatek to compete against the low-end smartphone chips that are designed by Spreadtrum. The MT6575 is expected to become popular within the mid-to-low end smartphone market and should help Mediatek cement its position within the low end sector.
Following the release of the MT6589 chip, which is expected to open up new opportunities in the mid-to-low end market, Mediatek aims to introduce the quad core MT6580 and MT6582 in 2H13. MT6582 is considered a more affordable version of MT6589, and supports both qHD resolution and 8MP camera. These features are expected to help the company redefine the boundaries of a mid-end smartphone as well as increase its overall consumer appeal. The MT6580, on the other hand, is intended to be a viable alternative to a Qualcomm chip. Other than supporting 1.5Ghz speed, HD resolution, and 13MP camera, the chip is able to work with the kinds of high-quality hardware that are typically compatible with Qualcomm processors. According to TrendForce, if Mediatek is indeed successful in enhancing its presence in the high end market, a price war involving high-end processors is likely to ensue. Should this happen, both consumers and smartphone manufacturers will benefit, and the boundaries among high end smartphone devices will become less and less clear.    
With China’s recent plans to expand the TD-LTE coverage for its 500 million users by 2020, and with the 4G industry growing at a tremendously rapid pace, the LTE ecosystem in China is set to become more and more mature in the foreseeable future. Qualcomm is very likely to benefit from such a trend given its priority on the 4G/LTE business. Following the high end chip pricing war, the 4G/LTE market will likely become next battlefield for chip makers.

End of the update

Tsinghua University investment arm makes buyout offer for Spreadtrum [Asian Venture Capital Journal, June 24, 2013]

Spreadtrum [展讯] Communications [处在], a Chinese mobile chip manufacturer backed by NEA, has received a [non-binding] buyout offer from a unit of Tsinghua Holdings, an investment entity controlled by Beijing-based Tsinghua University. The offer values Spreadtrum at $1.35 billion.

According to a regulatory filing, Tsinghua Unigroup will pay $28.50 in cash for all outstanding American Depository Shares – a 20% premium on the stock’s previous closing price. Spreadtrum’s stock jumped more than 16% in response to the announcement, closing Friday at $25.91.

As of year-end 2012, NEA owned 10.4% of the company, having initially participated in the $19.8 million Series B round in 2002. Spreadtrum went public on NASDAQ in 2007, raising $124.6 million. Silver Lake bought a 13% stake for $40 million in 2010 but exited the following year.

In 2011, Spreadtrum also came under fire from short-seller research firm Muddy Waters over alleged accounting discrepancies. The company denied any wrongdoing.

“We believe that an Acquisition by Tsinghua Unigroup [紫光集团有限公司], which is majority-owned by Tsinghua University, a central player in China’s technology and R&D sectors, would provide compelling strategic synergies and position the company for additional value creation in key wireless communications markets in China and elsewhere going forward,” Unigroup CEO Weiguo Zhao said in a letter to shareholders.

Tsinghua Holdings has committed to guarantee full equity or debt funding up to the total purchase price of $1.5 billion.

Spreadtrum was founded in 2001 and develops mobile chipset platforms for 2G, 3G and 4G wireless communication standards. Customers include handset manufacturers selling into China and other emerging markets. The company posted a net income of $92.4 million for 2012, down from $134 million the previous year, although revenues jumped 7.6% to $725.2 million.

Tsinghua Holdings is a state-owned company responsible for managing the majority of Tsinghua University’s commercial assets. As of year-end 2012, Tsinghua Holdings had approximately RMB70.4 billion ($11.5 billion) in assets and a net income of RMB1.45 billion. Unigroup focuses on high-tech, biotech, real estate and urban infrastructure investments.

Tsinghua Science Park Venture Capital, which also ultimately falls under the control of Tsinghua Holdings, participated in Spreadtrum’s Series A and B rounds.

Note that this shows the strong determination by the Chineses State because:
我国大陆IC产业发展面临三大障碍 Mainland China IC industry is facing three major obstacles [Hexun.com, June 22, 2013] as translated by Google and Bing with manual edits

Summary:

What are the essential elements in the development of the IC industry or power? The industry generally believes that strong government support, pragmatic policies and systems, building good infrastructure and abundant human resources, are the key elements how the IC industry in developing countries and regions may come from behind.

The operating efficiency of the Innovation Alliance, of the official mechanisms for collaboration, research, and industry R&D is not high, which is one of the significant factors restricting the rapid development of mainland China’s IC industry.

Mainland China’s IC industry in recent years gained rapid development, and some of the advantages of the competitiveness of enterprises began to appear. Taking the fastest-growing design industry as an example, in 2011 the overall IC design industry sales continued to maintain a high growth rate, reaching 47.374 billion yuan [US$7.7B], an increase of 30.2% year on year. In 2012, total sales for the top 10 design enterprises in China reached 23.117 billion yuan [US$3.8B], an increase of 2.97 billion yuan [US$484M] over the previous year. 10 companies accounted for 33.97% of total industry sales, 2.21% increase over the 31.76% in the previous year. First business sales reached $ 1.183 billion.

Spreadtrum Communications [展讯通信], RDA [锐迪科], HiSilicon [海思], Zhuhai Allwinner [珠海全志] and so on, i.e. the SoC enterprises have made great achievements in the field. But compared with Taiwanese and Korean enterprises there is still relatively slow development, the products are low-tech, and the competitiveness of the enterprises is weak. Price is also the company’s main business strategy, “design” is still not a mainstream, the situation of slow building of the base capability had not improved. Industry-wide sales may also be less than the sum of the sales of the world’s top-ranked design firms.

Note that out of the US$3.8B revenue of the top 10 design enterprises in 2012 Spreadtrum had US$725.2M which is not less than 19%. This data alone shows how important is the Spreadtrum acquisition in order to speed up the further development of the IC industry by putting the company together with the Tsinghua University which has a Research Institute of Circuits And Systems as well as an Institute of Microelectronics (IMETU), see here and here:

IMETU, the Institute of Microelectronics of Tsinghua University, was founded in 1980 on the basis of the Semiconductor Research Division, which was a research division of the Department of Electronic Engineering established in 1957. The mission of IMETU is to educate top level professionals and deliver scientific innovations in the domain Micro/Nano-electronics. During the past 30 years, IMETU has made significant contributions and key achievements for the development of China’s semiconductor and integrated circuit industry. Its faculty members and students won 8 national awards, more than 20 province or ministry level awards, as well as 136 granted patents. The institute consists of four divisions, Solid-State Devices and Integration Technologies, IC & System Design, Micro/Nano Devices and Systems, and CAD Technology. Up until March 2012, IMETU has 94 faculty and staff members, among which there are 14 professors and 46 associate professors. After 30 years of development, IMETU has been China’s leading research and education base in the area of Micro/Nano electronics. It has established a high-quality research infrastructure for microelectronics comprising of two major research directions, Micro/Nano electronics and IC & System Design. Meanwhile, alumni of IMETU have become the backbone of China microelectronic industry.

which is also the premier university partner of The Institute of Microelectronics of Chinese Academy of Sciences.

Major shareholders of Spreadtrum (with more than 5%): source Annual Reports

 
March 15, 2008
March 15, 2009
March 31, 2010
Feb 28, 2011
Feb 29, 2012
Feb 28, 2013
Scott Sandell [also includes New Enterprise Associates 11, Limited Partnership shares]
15.42%
15.71%
14.92%
14.4%
10.9%
10.4%
Entities affiliated with New Enterprise Associates 11, Limited Partnership
15.36%
15.61%
14.76%
14.2%
10.7%
10.1%
Entities affiliated with Fortune Venture Investment Group
6.31%
6.29%
       
Entities affiliated with Pacific Venture Partners
5.21%
5.30%
       
Entities affiliated with Silver Lake Partners
   
12.47%
5.8%
   
The Bank of New York Mellon Corporation
   
5.45%
 
5.2%
 
FMR LLC and Edward C. Johnson 3d
     
5.3%
   
FMR LLC
         
9.9%
Waddell & Reed Group
         
5.3%

image
source: Yahoo! Finance SPRD Major Holders

Tsinghua Unigroup Announces Offer to Buy Spreadtrum Communications [press release, June 21, 2013]

BEIJING–(Marketwired – Jun 21, 2013) – Tsinghua Unigroup Ltd. (“Unigroup”) today confirmed that it has made a non-binding offer to acquire Spreadtrum Communications, Inc. (NASDAQ: SPRD) (“Spreadtrum” or the “Company”) for $28.50 in cash per American Depositary Share (the “Transaction”). Spreadtrum is a leading fabless semiconductor provider in China with advanced technology in 2G, 3G and 4G wireless communications standards. The offer represents a premium of 20.1% over the closing price of the Company’s shares on June 19, 2013, the day preceding the delivery of the offer and 44.3% over the volume weighted closing price of the Company’s shares for the 30 trading days preceding the delivery of the offer.

Unigroup is an operating subsidiary of Tsinghua Holdings Co. Ltd., a solely state-owned limited liability corporation funded by Tsinghua University, one of the most prestigious universities in the world. Tsinghua Holdings owns and manages a substantial majority of the commercial assets of Tsinghua University. As of December 31st, 2012, Tsinghua Holdings had total assets of approximately 70.4 billion RMB [$11.45B], EBITDA of approximately 4.07 billion RMB, and net income of approximately 1.45 billion RMB for fiscal year 2012. Tsinghua Holdings’ corporate credit rating is AA+ according to CCXI, the Chinese domestic JV partner of Moody’s and the leading credit rating agency in China. Additional information about Tsinghua Holdings can be found at (http://www.thholding.com.cn/english/simpleindex.aspx). 

According to the preliminary non-binding proposal letter, Tsinghua Holdings has committed to guaranteeing the aggregate purchase price, which may be funded through a combination of equity and debt financing. 

Unigroup is excited about the proposed acquisition of Spreadtrum and the strategic opportunity this Transaction provides given the strength of this leading China-based business. Mr. Zhao Weiguo, the Chairman and CEO of Unigroup, commented, “We are enthusiastic about Spreadtrum’s business and market position globally and here in China, and we see Spreadtrum as an excellent strategic fit with Unigroup’s overall commercial objectives. We look forward to working together on the details of our proposed acquisition.” 

Unigroup’s proposal is non-binding and is subject to, among other things, satisfactory due diligence with respect to Spreadtrum and the execution of acceptable definitive agreements. There can be no assurance that Spreadtrum will support the Transaction, that any definitive binding offer will be made by Unigroup with respect to the Transaction, that any agreement with respect to the Transaction will be executed, that any conditions, including with respect to regulatory approval, will be satisfied, or that this Transaction or any other transaction, on the proposed terms or on any other terms, will be approved or consummated. Unigroup does not undertake any obligation to provide any updates with respect to this Transaction or any other transaction, except as required under applicable law.

About Tsinghua Unigroup Ltd.

Tsinghua Unigroup Ltd. (“Unigroup”) is an operating subsidiary of Tsinghua Holdings Co. Ltd., a solely state-owned limited liability corporation funded by Tsinghua University in China. Tsinghua Holdings Co. Ltd. is the controlling shareholder of Unigroup. Unigroup’s business lines include high-technology, bio-technology, science park development, and urban infrastructure construction.

About Spreadtrum Communications, Inc.

Spreadtrum Communications, Inc. (NASDAQ: SPRD) (“Spreadtrum”) is a fabless semiconductor company that develops mobile chipset platforms for smartphones, feature phones and other consumer electronics products, supporting 2G, 3G and 4G wireless communications standards. Spreadtrum’s solutions combine its highly integrated, power-efficient chipsets with customizable software and reference designs in a complete turnkey platform, enabling customers to achieve faster design cycles with a lower development cost. Spreadtrum’s customers include global and China-based manufacturers developing mobile products for consumers in China and emerging markets around the world. For more information, visit www.Spreadtrum.com.

This press release does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy any security, nor is it a solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of the securities referred to in this press release in any jurisdiction in contravention of applicable law.

Note that with June 27, 2007 Spreadtrum IPO on Nasdaq the company had $125.9M initial market capitalization which a year later became $209.41M; the quarterly revenue at IPO time was US$38.6M:

image

image

Data is in US$

Spreadtrum Closes $35.2 Million Series C funding [press release, June 4, 2004]

Sunnyvale, California – June 4, 2004 – Spreadtrum Communications Inc., a leading fabless semiconductor company developing and marketing innovative digital wireless communications products, today announced the completion of $35.2 million Series C financing led by New Enterprise Associates (NEA) with additional participation from existing investors, Fortunetech Investment Fund, Pacific Venture Group, Vertex, Legend Capital, HuaHong International and more.

“Proceeds from this financing will be used primarily to expand operations and to develop new product offerings,” said Dr. Ping Wu, President of Spreadtrum. ‘Spreadtrum has gained customers acceptances in the GSM/GPRS markets and is now gaining traction in the 3G area. We are very pleased to be working with these experienced venture capital firms. With their industry knowledge and resources, we are confident we will expand our global reach.
“Spreadtrum has all the components we look for when making an investment,” said Scott Sandell, NEA general partner and Spreadtrum board member. “With its experienced management team and superior technology, Spreadtrum is poised to emerge as one of the world-class fabless semiconductor companies. They continue to demonstrate their ability to develop and market their products while gaining traction in this large, explosive market.”
Spreadtrum is currently shipping GSM/GPRS baseband chipset SC6600 families and GSM/GPRS module SM5100 families. The SC6600 is a highly integrated GSM/GPRS single baseband mixed signal chip containing all digital and analog functionality for a GSM/GPRS wireless phone. The SM5100 provides both voice and data functions, and can be used in GSM/GPRS tri-band cell phones, data modems and other mobile terminal devices. Reference designs for a complete GSM/GPRS handset terminal are available. Spreadtrum also has single and dual CPU solutions for various market demands. More information about Spreadtrum products is available via email at info@spreadtrum.com.

New Enterprise Associates Participates in $20 Million Series D for Spreadtrum Communications [Baltimore Citybizlist. Oct 31, 2006]

Spreadtrum Communications Inc., a Sunnyvale, Calif.-based maker of wireless chipsets, has secured $10 million of a $20 million Series D round, according to a regulatory filing. Return backers include Fortune Venture Group and New Enterprise Associates. The company has several offices in China. www.spreadtrum.com

About Spreadtrum
Spreadtrum Communications was founded in 2001 by a group of innovative entrepreneurs with determination to face any challenge in the future. Under Dr. Ping Wu’s leadership, Spreadtrum successfully set up offices in Silicon Valley and several different cities in China. It grew rapidly within the past a few years and became a raising star in the IC and wireless communications industry. Spreadtrum’s products became the choice of many Chinese and international clients. Spreadtrum focuses on the development and sales of the new generation wireless IC, provides fast-to-market, cost-effective and high-performance solutions for wireless terminal manufactures and design houses.
Our core competitive products are:
  • 2G/2.5G/3G baseband IC: High integration, high performance, great functionalities
  • Communication software: validity, stability, customizability
  • Wireless platform: differentiated value-added open platform, reduced development time, increased product competitive edge
  • Wireless module: Customizable, flexibility, high quality
Spreadtrum not only has complete wireless terminal core chip series and related software and platform solutions that cover from high-end to low-end handset markets, but also has successfully developed world’s first single TD-SCDMA/GSM/GPRS(3G/2.5G) dual mode baseband chip as well as world’s first single integrated multimedia GSM/GPRS baseband chip. By utilizing Spreadtrumer’ expertise and newest design methodology in the industry, Spreadtrum single chips solution possesses the characteristics of higher integration, smaller size, lower power consumption and higher performance and therefore greatly reduces system BOM cost. Spreadtrum is the first IC designs company to develop its own software protocols. Its open platform allows customers to customize their products in order to differentiate themselves among competitors. Spreadtrum provides its customers with warm-hearted support and fast response time to reduce their development cycle and shorten their time-to-market.

Spreadtrum Communications [InsideChips, 2006]

Based in Sunnyvale, Calif., with most of its engineering operations in China, Spreadtrum Communications is developing chips for China’s large and rapidly growing domestic cellular market. The company is developing single-chip solutions for GSM/GPRS and TD-SCDMA/GSM/GPRS mobile devices, and has integrated all of the analog, digital and power-management functions as well as a full set of multimedia features and interfaces into the chips.

Founded only five years ago, Spreadtrum has already grown to 450 employees. CEO Ping Wu and CTO Datong Chen founded Spreadtrum with Renyong Fan (VP of operations) and Jin Ji in July 2001. The company raised $6.5 million in Series A funding at the time of founding, followed by a $20 million Series B round in Nov. 2002 and a $35 million Series C round in April 2004. The company has more than 30 investors, with the largest including New Enterprise Associates (NEA), Fortunetech Investment Fund, Pacific Venture Group, Vertex, Legend Capital and HuaHong International.

Spreadtrum offers three chip products:
  • SC6600M GSM/GPRS baseband chip – In addition to baseband functionality, the 6600 also supports a number of functions typically implemented separately on different chips. These include support for a 1.3-megapixel digital camera with video recording and playback, 64-polyphonics with stereo sound, MP3 player, USB interface and USB removable memory. Analog I/F features include a wide-range RF interface and power management on chip.

    Spreadtrum began volume shipments of the SC6600 in June 2003, primarily to domestic handset makers including TCL, Ningbo Bird, Amoi Electronics, Hisense and Putian Capitel.

  • SC8800 Single-chip TD-SCDMA/GSM/GPRS dual-mode baseband chip – Powered by the CEVA-Teak DSP core, the SC8800 enables dual-mode 2G/3G phones that operate transparently over China’s TD-SCDMA and GSM networks. As with the SC6600, the chip integrates analog, digital and power management functions on a single chip.
  • SC6800 GSM/GPRS multimedia baseband IC – The SC6800 integrates an ARM9 processor and TeaKLite DSP, 5-megapixel camera controllers, auto-focus controllers, MPEG4 accelerator and MP3 player, and supports TV out and other multimedia application-processing functionalities.
Spreadtrum also offers a wireless module, the SM5100B, which incorporates the baseband chip, RF chipset, combo flash and software. Intended for applications such as wireless desktop phones, mobile phones, remote monitoring and remote meter reading, the module provides all the required functionality for full-featured GSM/GPRS terminals.
Spreadtrum provides its customers with IP and application software, and developed its own protocol stack software. The open platform enables customers to perform high-level development to implement their own IP and value-added features.
Compared with the Europe-initiated WCDMA and U.S.-backed CDMA 2000 3G standards, China’s homegrown 3G standard, TD-SCDMA, arrived late to the game. We even heard that Chinese telecom operators were reluctant to use TD-SCDMA due to that fact. Nevertheless, the Chinese Ministry of Information Industry formally approved TD-SCDMA on Jan. 20, 2006, as the national technology standard for 3G mobile communications.
Spreadtrum projects that shipments of 3G mobile phones in China will grow to 9.5 million units by 2007, up from 3.3 million units in 2004. The Industrial Technology Information Services (ITIS), a unit of Taiwan’s Ministry of Economic Affairs (MOEA), projects subscriptions for 3G services in China will increase from 15 million in 2006 to 80 million by 2008.
However, according to market research firm ABI Research, the establishment of a national 3G network will not greatly change the existing mobile landscape. The Chinese government will provide strong policy support to help TD-SCDMA operators gain time and establish a price lead over other 3G technologies, says ABI, but GSM will continue to be the dominant technology in China over the next five to eight years.
China is conducting its final TD-SCDMA trials in select cities between March and June. These latest trials follow three earlier rounds of tests, and should be the last before commercial use.
Spreadtrum will be competing with fellow TD-SCDMA chipmakers such as Commit (a joint venture involving Nokia, Texas Instruments, LG, Putian, DBTEL and Datang), Chongyou Information Technology, T3G (a joint venture of Datang, Philips and Samsung), Analog Devices and others.
The number of Chinese IC startups has been rapidly growing over the last few years, although many appear to have relatively simple technology, few people, little cash and fairly modest expectations. But a few – such as Spreadtrum – have set their sights higher and are establishing themselves as significant technology companies. We are impressed with Spreadtrum’s high level of integration in its products, as well as its ability to attract major investors and the early establishment of a global presence. We believe the company has a good chance for continued growth and success in China’s telecom market.

Spreadtrum Communications Announces Receipt of Acquisition Proposal [press release, June 21, 2013]

SHANGHAI, June 21, 2013 /PRNewswire-FirstCall/ — Spreadtrum Communications, Inc. (NASDAQ: SPRD; “Spreadtrum” or the “Company“), a leading fabless semiconductor provider in China with advanced technology in 2G, 3G and 4G wireless communications standards, today announced that its Board of Directors has received a preliminary non-binding proposal letter, dated June 20, 2013, from Tsinghua Unigroup Ltd. (“Unigroup“), an operating subsidiary of Tsinghua Holdings Co. Ltd., a solely state-owned limited liability corporation funded byTsinghua University in China, pursuant to which Unigroup proposes to acquire the Company (the “Transaction“) for S$28.50 in cash per American Depositary Share (each American Depositary Share represents three ordinary shares of the Company).  A copy of the proposal letter is attached hereto as Appendix 1.

The Company’s Board of Directors is reviewing and evaluating Unigroup’s proposal and cautions the Company’s shareholders and others considering trading in its securities that the Board of Directors has just received the Unigroup proposal, and has not yet made any decisions with respect to the proposed Transaction, or the Company’s response to the proposed Transaction. There can be no assurance that any definitive offer will be made, that any agreement will be executed or that this or any other transaction will be approved or consummated. The Company does not undertake any obligation to provide any updates with respect to this or any other transaction, except as required under applicable law.

About Spreadtrum Communications, Inc.

Spreadtrum Communications, Inc. (NASDAQ: SPRD; “Spreadtrum“) is a fabless semiconductor company that develops mobile chipset platforms for smartphones, feature phones and other consumer electronics products, supporting 2G, 3G and 4G wireless communications standards. Spreadtrum’s solutions combine its highly integrated, power-efficient chipsets with customizable software and reference designs in a complete turnkey platform, enabling customers to achieve faster design cycles with a lower development cost. Spreadtrum’s customers include global and China-based manufacturers developing mobile products for consumers in China and emerging markets around the world. For more information, visit www.spreadtrum.com.

Appendix 1

Acquisition Proposal Letter

June 20, 2013
The Board of Directors
Spreadtrum Communications, Inc.
Spreadtrum Center, Building No. 1
Lane 2288, Zuchongzhi Road
Zhangjiang, Shanghai 201203
People’s Republic of China
Ladies and Gentlemen:
Tsinghua University, through its subsidiary Tsinghua Unigroup Ltd. (“Unigroup“) is pleased to submit this preliminary non-binding proposal to acquire Spreadtrum Communications, Inc. (the “Company,” and such transaction the “Acquisition“).
We believe that our proposal as outlined below will provide a very attractive alternative to the Company’s shareholders.  Our proposal represents a premium of 20.10% to the Company’s closing price on June 19, 2013 and a premium of 44.3% to the volume-weighted average closing price during the last 30 trading days.
In addition to the premium that our proposal would deliver to Spreadtrum shareholders, we believe that an Acquisition by Tsinghua Unigroup Ltd., which is majority owned by Tsinghua University, a central player in China’stechnology and R&D sectors would provide compelling strategic synergies and position the Company for additional value creation in key wireless communications markets in China and elsewhere going forward.
The terms and conditions upon which we are prepared to pursue the Acquisition are set forth below. We are confident in our ability to consummate an Acquisition as described in this letter.
1. Purchase Price. The consideration payable for each American Depositary Share of the Company (“ADS,” each representing three (3) ordinary shares) will be U.S. $28.50 in cash.
2. Financing. We may finance a portion of the aggregate purchase price with debt. Tsinghua Holdings Co. Ltd., our controlling shareholder, has provided us with a Letter of Support, dated June 20, 2013, a copy of which is attached hereto as Exhibit A, pursuant to which Tsinghua Holdings has committed to guarantee full funding for any equity or debt financing that may be required for the Acquisition, as set forth therein.  For the avoidance of doubt, while we may seek to finance a portion of the acquisition with debt financing, Tsinghua Holdings has agreed to provide equity funding up to the total purchase price of $1.5 billion if satisfactory debt financing is not available.
3. Due Diligence. We will be in a position to commence our due diligence for the Acquisition immediately upon receiving access to the relevant materials.
4. Definitive Agreements. We are prepared to negotiate and finalize definitive agreements (the “Definitive Agreements“) concurrently with our due diligence review. This proposal is subject to execution of Definitive Agreements. These documents will provide for representations, warranties, covenants and conditions customary for transactions of this type.
5.  Confidentiality.  Other than the announcement of this offer letter, we are confident you will agree with us that we have a shared interest in proceeding in an otherwise confidential manner, unless otherwise required by law, until we have executed Definitive Agreements or terminated our discussions.
7. Further Information About Tsinghua Holdings and Tsinghua Unigroup. Unigroup is an operating subsidiary ofTsinghua Holdings,  a solely state-owned limited liability corporation funded by Tsinghua University that is responsible for managing a substantial majority of Tsinghua University’s commercial assets.  As of December 31st, 2012, Tsinghua Holding’s total assets approximated 70.4 billion RMB and Tsinghua had EBITDA of approximately4.07 billion RMB and net income of approximately 1.45 billion RMB for fiscal 2012.  Tsinghua Holdings’s corporate credit rating is AA+ according to CCXI, the Chinese domestic JV partner of Moody’s and the leading credit rating agency in China.  Additional information about Tsinghua Holdings can be found at (http://www.thholding.com.cn/english/simpleindex.aspx).  Other shareholders include Beijing Jiankun Investment Group Co. Ltd. and Beijing Tourism Group. Unigroup’s business lines include high-technology generally, bio-technology, real estate and urban infrastructure construction. 
8.  No Binding Commitment. This letter constitutes only a preliminary indication of our interest, and does not constitute any binding commitment with respect to an Acquisition. Such a commitment will arise only upon execution of Definitive Agreements, and in such case will be on the terms provided in such documentation.
In closing, we would like to personally express our commitment to working together in bringing this Acquisition to a successful and timely conclusion.  We look forward to hearing from you regarding our proposal at your earlier convenience and kindly request that you notify us by June 28, 2013 should you desire to engage in further discussions about our proposal.
Very truly yours,
Tsinghua Unigroup Ltd.
By: /s/ Zhao Weiguo
Name: Zhao, Weiguo
Title: Chairman and President

Exhibit A
TSINGHUA HOLDINGS LETTER
From:
Tsinghua Holdings Co., Ltd.
25F, Building A, S.P Tower
Tsinghua Science Park
Beijing 100084, P.R. China
                                                                                                 June 20th, 2013
To:
Chairman Zhao Weiguo  of Tsinghua Unigroup Ltd.            
10/F, Unis Plaza, Tsinghua Science Park
Beijing, 100084, P.R. China
Subject:  Tsinghua Holdings Co. Letter of Support and Agreement to Guarantee Full Funding for the Acquisition ofSpreadtrum Communications, Inc. by Tsinghua Unigroup Ltd.
Dear Mr. Zhao,
This letter (our “Letter of Support“) is to confirm our official endorsement and commitment to support Tsinghua Unigroup Ltd (“You“) in your bid to acquire Spreadtrum Communications, Inc. (NASD: SPRD) (the “Target” and such transaction, the “Project“) at the price of U.S. $28.5 per ADS for up to USD $1.5 billion (the “Support Amount“) and to guarantee any equity or debt financing that may be required for the Project.
As you know, we own and manage a substantial majority of the commercial assets of Tsinghua University, one of the most prestigious universities in the World. As of December 31st, 2012, our total assets approximated 70.4 billion RMB with 2012 EBITDA of approximately 4.07 billion RMB and 2012 net income of approximately 1.45 billion RMB. Tsinghua Holdings Co.’s corporate credit rating is AA+ according to CCXI, the Chinese domestic JV partner ofMoody’s and the leading credit rating agency in China.  Our corporate website contains further background information about Tsinghua Holdings, and can be found at (http://www.thholding.com.cn/english/simpleindex.aspx).
As the manager of the commercial affairs of the University, we are the parent company to Tsinghua Unigroup Ltd and own 51% of its outstanding capital shares.   We have officially approved the Project and have decided to fully support the Project to facilitate its rapid completion.  Although we have sufficient resources to fund the Project up to the full Support Amount from our own balance sheet, we understand that You may elect to utilize debt financing to fund a portion of the purchase price for the Target.  In any such case, we intend to assist You in obtaining any such debt financing on favourable terms.  In furtherance thereof, we will provide a corporate parent guarantee of such financing up to the Support Amount minus the amount of any equity contribution for the Project (and subject to any applicable government approvals).  In furtherance thereof, we will execute any bank or third-party guarantees and other related documents requested by you in form and substance reasonably acceptable to us and to any lender providing such funding.
At your discretion, this Letter of Support can be shared with parties with whom you are discussing the Project.
This Letter of Support and our agreement to provide a guarantee is a commitment of our broad financial enterprise, and credit support for purposes of the Project.
Yours faithfully,
Tsinghua Holdings Co., Ltd.
By: /s/ Xu Jinghong
Print Name: Xu, Jinghong
Title: Chairman of Tsinghua Holdings Co., Ltd.
To see a full copy of the signed version of these letters, click here:
http://www.prnasia.com/sa/attachment/2013/06/20130621172830287567.2 – Acquisition Offer Letter and Funding Support Letter.pdf
SOURCE Spreadtrum Communications, Inc.
Diana Jovin, ir@spreadtrum.com, +1 650-308-8148

1 Comment

  1. […] Spreadtrum is to be acquired by a Chinese high-tech investment enterprise owned by the state and als… [‘Experiencing the Cloud’ Blog, June 26, 2013] […]

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