Foxconn Unit Plans IPO That Could Raise $1 Billion
July 05 2016 - 7:10AM
Dow Jones News
HONG KONG—Taiwan's Hon Hai Precision Industry Co., which
assembles most of Apple Inc.'s iPhones, filed for an initial public
offering of its cable and connector unit in Hong Kong that could
raise up to $1 billion as it seeks to tap the growing demand for
its products in cloud computing.
The unit, called Foxconn Interconnect Technology Ltd., could
raise between $500 million and $1 billion from the IPO, according
to people familiar with the matter, although a final decision on
the exact amount the company wants to raise hasn't been
decided.
The company makes key components that go into electronic
devices, transferring data at high speeds. Demand for those
products could grow in the coming years as cloud computing services
become more widespread and need faster connectors to link servers.
Hon Hai, also known as Foxconn, announced plans to spin off and
launch an IPO of its interconnect business in June 2013, although
the original plan was to list the business on the Taiwan Stock
Exchange.
The company's desire to raise its global profile made Hong Kong
a more attractive market in which to list, according to a person
familiar with the matter. Other tech companies that make computer
components also trade in Hong Kong, making it a familiar bet for
investors in the market, the person said.
The company is likely to list in the third or fourth quarter of
this year, one of the people said.
It is unclear whether Foxconn will continue to maintain majority
control of the company following the offering, the person added. A
spokesperson for Foxconn didn't respond to requests for
comment.
Foxconn Interconnect Technology ranked as the largest connector
maker in Greater China by revenue in 2015 and the fifth-largest in
the world, with an 11.7% and 4.2% share of those respective
markets, according to Frost & Sullivan, a business consulting
company.
The company's electronic connectors and cables are used in
computers, consumer electronics and automobiles. It has factories
across the globe from Taiwan to Mexico.
Analysts say the need for connectors to become faster and more
nimble as companies generate and store more big data is increasing,
with upgrades becoming a crucial part of the next generation of
internet data centers. "All this data needs storage and servers to
process so the need for high-speed transportation is important,"
said Amy Teng, research director at Gartner in Taiwan. "The margins
will be good."
The company's revenue has declined in recent years, to $2.33
billion in 2015 from $2.51 billion in 2013. The company said in its
filing that the decreases were mainly due to the maturity of its
customers' product portfolios, particularly in the global mobile
and wireless devices end market, and an increase in pricing
pressure. The firm has invested in newer technologies, such as
solar panels and robotics, but those investments haven't generated
significant revenue.
The Foxconn unit said in its filing that it plans to use the
proceeds from the IPO for a range of purposes, including product
development, potential acquisitions and investment in technology
for use in data centers for big data and cloud computing.
Bank of America Corp.'s Merrill Lynch unit, China International
Capital Corp. and Credit Suisse Group AG are handling the
offering.
Kane Wu contributed to this article.
Write to Alec Macfarlane at Alec.Macfarlane@wsj.com and Alyssa
Abkowitz at alyssa.abkowitz@wsj.com
(END) Dow Jones Newswires
July 05, 2016 06:55 ET (10:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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