Rumours of an ASUS -Gigabyte takeover scotched, but this is the next best thing.
Gigabyte and ASUS will form a new company to produce and market video cards and motherboards, it was announced today.
This comes after intense rumours of an ASUS takeover of Gigabyte. The new company will be controlled by Gigabyte with 51% of the shares. ASUS will have a 49% stake.
Press release follows:
GIGABYTE Technology Press Release
Aug 08, 2006
In accordance with the relevant regulations pertaining to Company Law, Securities Law and Business Merger & Acquisition Law, a resolution of the board of directors was passed on the 8th of August, 2006 for GIGABYTE Technology Co., LTD (Stock Code: 2376) to transfer the relevant assets and businesses of its own branded motherboards and VGA cards to a newly established subsidiary. After all the necessary legal procedures and obligations have been fulfilled, ASUSTek Computer Inc. (Stock Code: 2357) plans to invest in this newly established GIGABYTE subsidiary to help manage the joint venture and develop a strategic alliance with GIGABYTE. Both parties will work together to increase operation efficiency, enhance product quality, provide better customer service and create a higher value for shareholders.
The capital of this joint venture will be NT$ 8,000,000,000 (eight billion NT dollars). GIGABYTE Technology intends to hold 51% of the shares and ASUSTek will hold 49%. This joint venture plans to commence operating in January 2007. There will be five directors and two supervisors in this joint venture, with GIGABYTE appointing three seats of directors and one supervisor, and ASUSTek appointing two directors and one supervisor.
According to the Institute of Information Industry (MIC), the total value of motherboards produced in 2005 was US$8.9 billion, a growth rate of only 2.2% from year 2004. The total value of motherboards produced for the first half of 2006 has fallen to US$3.67 billion in comparison to the US$3.75 billion for the first half of 2005. In addition, the leading brand PC manufacturers have increasingly enlarged their market share, causing the market share for the motherboard channel to decline dramatically. In this slow developing market environment, GIGABYTE seeks to establish an alliance with ASUSTek in order to assist the operation efficiency of GIGABYTE’s motherboard business. Apart from increased efficiency, GIGABYTE will have greater resources to expand their diversified business. Because of the increasingly mature nature of the motherboard industry, this joint venture will combine the resources of two leading motherboard manufacturers, allowing for a greater economical impact on the market, better research and development capabilities and elevated product quality. It is believed that this strategic alliance will create a win-win situation for shareholders, employees and customers of both companies.