American buyout funds expected to spend US$600m on purchase Semiconductor Manufacturing International Corp has attracted non-binding letters of interest from United States buyout funds including Bain Partners, General Atlantic and Kohlberg Kravis Roberts for the purchase of an up to 25 per cent stake in the largest mainland chipmaker, sources said. The private equity firms planned to spend about US$600 million for between 20 and 25 per cent of Shanghai-based SMIC, they said. However, SMIC chief executive Richard Chang Ru-gin has pushed back the planned close of the deal, which was originally the end of this month, in the hopes of attracting stronger interest from funds such as TPG-Newbridge and Blackstone Group, bidders he prefers. 'They want to engage two, ideally three investors, so no single investor has too much control,' said one source. 'They really liked the way TPG approached them and also see TPG as one of the savviest technology investors.' TPG was part of a consortium that took up a 10 per cent stake in Lenovo Group, the third-largest personal computer maker in the world, for US$350 million two years ago. In September last year, TPG, Blackstone and others paid US$17.6 billion for US-based Freescale Semiconductor. People familiar with one of the preferred bidders said it was difficult for the deal to happen given Mr Chang intended to keep absolute management control of the firm. His refusal to delegate power has also created conflict with some members of SMIC's board of directors. Other board members were more supportive of Mr Chang's strong-willed management style and vision for the company, sources said. 'The company's messy at the top,' said one source, whose fund does not plan to pursue the deal any further because they do not want to enter a situation with a board at odds with one another. TPG and Blackstone declined to comment. Mr Chang did not return a telephone call or e-mail seeking comment. 'SMIC announced on January 3 that both the management, including Mr Chang, and the board are always open to possible options and looking at strategic and/or other opportunities to enhance shareholder value,' SMIC Hong Kong representative Anne Chen said. 'Although no firm decision has yet been made about any resulting transaction, SMIC will keep the public informed of any material new development,' she said. SMIC hopes to have a deal by the end of June, but people close to the company acknowledge that there is no easy fix to the issues some bidders have. 'A deal may be there,' said one person. The company was approached by investors including Bain, Macquarie and KKR earlier this year, but they made it clear that Mr Chang would have to leave the company, a source said. That was an option Mr Chang refused to consider. Barring such issues, some in the private equity community see SMIC's underlying business as a solid investment. Others are steering clear of the chip industry. 'The semiconductor foundry game is over and I don't see anyone having a real chance to catch up to Taiwan Semiconductor Manufacturing Co, which is the real winner,' said one market observer who was sitting the deal out. TSMC is the world's largest chipmaker.