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TDK Semiconductor delays a planned IPO

Souring market conditions and a softening semiconductor market may prevent Tustin-based TDK Semiconductor from going public this year as planned, according to company officials.

Under the advice of investment bankers, company executives said they’ve postponed plans for an initial public offering originally set for as early as this spring. Officials at TDK Semiconductor, a unit of Japanese electronic components giant TDK Corp, said the company could pursue a spin-off in the fourth quarter or possibly the first quarter of next year.

“We want it to be the most successful IPO possible,” said Gerald Fitch, TDK Semiconductor’s new chief financial officer. “We think the market is certainly going to come back, but investment bankers tell me the window is closed right now.”

As other Orange County chip makers grapple with an industry downturn, TDK Semiconductor officials said a slight slowdown in their own business convinced them to reconsider the timing of an offering.

“We’re always concerned when our competitors have issues of reduced sales volumes,” Fitch said. “We’re seeing a reduction in capital spending. But ultimately, when you’re looking at those businesses, spending is continuing to increase.”

Delaying an offering helps give the company some breathing room, he said.

“We’re in a nice position. We have a parent company with a nice amount of cash, so we don’t need to raise capital,” Fitch said.

For now, the company is busily making preparations. Within two months, executives expect to find an investment bank to underwrite an offering.

“We’re talking to all the usual candidates. We want someone who will not only underwrite the IPO, but advise us on other financial issues,” Fitch said. The offering, which could fetch as much as $100 million, has played no small part in attracting more talent to the company, said Andy Mills, a TDK Semiconductor vice president.

“We’ve seen quite a few (applicants) from Conexant,” Mills said. “And we’ve had a lot fewer people leave this company. It’s tough for me to think of people we have lost on the design or engineering side. We had some pressure because we couldn’t offer a similar compensation structure to those offered at other companies.”

Executives also hope the money raised will help TDK Semiconductor acquire companies with new technology and expand into more lucrative markets, Fitch said.

“We want to have currency for acquisitions,” Fitch said. “We want to continue to expand our exposure to certain opportunities. We see a lot of opportunity in wireless, and that’s an area where we want to keep expanding.”

TDK Semiconductor plans to expand in OC. Fitch said the company hopes to add another 15,000 to 20,000 square feet to the company’s current 60,000 square foot office in Tustin. Additionally, the company hopes to add space to its office in Sunnyvale.

TDK Semiconductor plans to offer up to 20% of its shares to the public, with parent TDK retaining the majority. n

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