PwC - Investment and Corporate Insight's for SIA's In This Together Series
INVESTMENT CASE SOITEC 2018 CB
1. INVESTMENT CASE ON A CONVERTIBLE TRADE
IDEA SENT ON 22 MARCH 2016 WHEN CB WAS TRADING AT 2.15E
ON 11 MAY, SOITEC ANNOUNCEDOFFER ON ALL CONVERTIBLE BONDS AT 2.45E
THIS REPRESENTS A 14% UPSIDE IN LESS THAN 2 MONTHS
=============================================================================
INITIAL INVESTMENT CASE SENT ON 22 MARCH 2016
Soitecisarranginga massive capital increasesubjecttoshareholderapproval on11 April 2016 to i)
pay back a bridge loan,ii) have some cashforfuture capex andiii) repaypartof the convertible 2018
convertible bond.
This is more or lessa repetitionof what happenedin 2013, when SOITEC issueda capital increase
and the 2018 convertible to pay back the 2014 convertible bond inadvance.
At the time,the convertiblebondwasboughtbackat nominal andconvertible bondholders
whotendered“missedout”the lastcoupon(ie 6¼ %).
What I think will happen:
- Soitecwill raise the maximum it can via its2 capital increases(detailsbelow) ie 180mE
- Soitecwill use 80mE to buy back as many convertiblesas possible viaa kind ofDutch
auction
- I think the price to be paid will be nominal (ie 2.58E / convertible bond,ie 17% higherthan
2.20E, where the bond is trading right now)
- Timing:the cash payment for the bondswill be done in July 2016 in my view(see the
“timing” paragraph below)
==================================================================================
=========
Characteristic of the convertible bondSOITEC 2018
- Nominal value perbond:2.58E
- Couponof convertible bond:6¾% paidsemi annually(paidinmidMarch andmid
Septemberof eachyearuntil September2018)
2. - Maturity:18 September2018
- Total size of convertible bond:103.2mE
- Currentprice of convertible bond:2.20E(no accruedinterestincludedinthe price of the
bond)
The 2 capital increasesthat Soitec will carry out:
- A reservedcapital increase of 76.5mE done at 0.55E / share (a verysmall discountto
current Soitecshare prices)
o CEA investment(FrenchinstitutioncontrolledbyFrenchState),BPIFrance (French
State Fund) and NSIG(Chinese industrial grouplinked toSemiconductorindustry)
are subscribingtothe reservedcapital increase
- A capital increase withsubscriptionrights
o Between53.5mE and103.5mE to be raised
o Already guaranteedup to 103.5mE by a syndicate ofbanks (Soitecdoesn’t
communicate the name of the banks)
o CEA, BPIand NSIGwill afterthe 2 capital increasesown40% of the capital of Soitec
- The proceedsof the capital increaseswill therefore range between130mE and 180mE
o I think Soitec will raise the 180mE inany case as this offersa unique opportunity for
them to raise a significantlevel ofcash
The proceedsof the capital increase will be usedas follows:
- 50mE to payback a bridge loanmaturinginMay 2016
- 40mE to be keptas cash for future capex (tobe usedinthe next18/24 months)
- Between40mE and 80mE hence to be usedto buy back the 2018 convertible bonds(ie
between40% and 80% of the nominal of the convertible)
Suspensive clause still to be validatedfor the plan to go ahead:
- The investmentfromNSIGneedstobe approvedbya Frenchforeigninvestmentauthority
o Thisprocesswill have beenfinalizedbefore the 11April,date of the AGM of Soitec
that will needtovote forthe 2 capital increases
o Also,Idon’t thinksuchapproval isa problem, consideringthatthe 2 investors
alongside NSIGare the FrenchCEA andBPI France (bothcontrolledbyFrenchState
…)
- For the planto go ahead,youneedapproval of the planby the AGMof 11 April.
o Minorityshareholdersof Soitecmightbe fedupbeingdiluted
o HoweverIthinkthe AGM will vote infavourof the planespeciallyas12/13% of the
capital isownedalreadybyBPIFrance and Caisse desdépots
3. AGM:quorum and votesnecessary
- QuorumneededforAGMto be valid:25% of all shares
- Votesnecessarytopasscapital increase:2/3of quorum
Timing:
- April 11: AGM to validate the 2capital increases
- End April:reservedcapital increasefinalized
- May 2016-end: endof consultationwiththe convertible holdersinpreparationof the Dutch
auctionon the convertibles
- June 2016: capital increase withsubscriptionrights
- July2016: Dutch auctionon the convertible bonds
What is Soitec?
- Soitecisa companyspecializedinFDSOITechnology,whichenablesmore speedandless
consumptionof powerforchips.
- Inthe past,it had2 divisions,one dedicatedtosolarpower,one dedicatedtoconsumer
appliances(phones,tablets…)
- Last year,the companymade a bigprofitwarninganddecidedtosell itssolarpower
businessdue tolackof turnover
- It isnowrefocusedonFDSOItechnologyusedforconsumerappliances.STMicroisvery
bullishonitstechnologyandisstartingproductionof chipsusingFDSOI…
EverythingImentionabove isexplainedinthe presentationmade bythe companyon10 February
below
http://information-soitec2016.datadraft.net/img/medias/20160210-
Soitec_Proposed_Capital_Increases_vE.pdf