TAIPEI (Reuters) - China's Ministry of Commerce approved the $3.8 billion merger between Taiwanese chip designers Mediatek Inc and MStar Semiconductor Inc with conditions on Tuesday on worries about potential monopoly in the TV chip market.
The Chinese regulator said the two companies cannot collaborate in the LCD television chip segment and MStar's subsidiary that operates the LCD TV chip business will have to remain an independent entity. Only the smartphone chip and other business related to wireless communications will be merged into Mediatek.
Mediatek agreed to buy rival MStar last year to boost its competitiveness in the fast-growing market for chips that power mobile devices and new gadgets, such as smart televisions.
Mediatek offered 0.794 of its own shares and T$1 in cash for every MStar share, which valued the whole of MStar at about $3.8 billion based on MStar's closing share price at the time and total shares issued of 529.4 million, according to Reuters data.
Mediatek has said it planned to acquire 40 percent to 48 percent of MStar through the offer and will at a later date buy the rest of the company.
Mediatek and MStar issued separate statements after the ruling from the Ministry saying they will submit a new proposal to the regulator and that they expect to close the deal within three months.
On Tuesday, Mediatek closed at T$367.5 while MStar closed at T$246.5.
(Reporting by Clare Jim; Editing by Louise Heavens)