CR Logic said it expected to gain $74 million from the disposal if the transaction proceeded.

The consideration represents 12 times the average after-tax profit reported by the office furniture business Palazzo Group for the past two financial years, and is about 1.8 times its net tangible asset value as of December 31, last year.

Proceeds from the sale of Palazzo will strengthen the company's financial position, thus providing more financial resources for the development of CR Logic's semi-conductor and compressor businesses, said Zhu Jin-kun, deputy chairman and chief executive of CR Logic.

The company said the sale would have an insignificant impact on the financial results as Palazzo's unaudited after-tax net profit and total assets represented only 2 per cent and 3 per cent of CR Logic, respectively.

Mr Zhu said third-quarter semi-conductor sales had continued to perform well, adding however that profit margins might face pressure after the new six-inch wafer production line commenced operations next month.

'Typically it takes three years for a new production line to be geared up to suit the needs of customers. But depreciation is factored into the profit and loss account just after production commences,' Mr Zhu said.

He said a clear division of work had been well set out with CSMC Technologies, a company associated with CR Logic that is engaged in foundry services of six-inch and eight-inch wafer products, but with entirely different product lines.

The compressor market has become more competitive than it was two years ago, he said.