Taiwan Epistar’s board of directors has agreed with a proposal to acquire Huga Optotech Inc. as its wholly owned subsidiary by all-stock swap at ratio of one Epistar share for 4.85 Huga shares.

Baseline date for the swap is tentatively set at Dec. 28 in 2012. Both companies will bring the deal to an irregular shareholders meeting on Sept. 28 for vote.

Industry executives said the deal, estimated at NT$4 billion (US$133 million at US$1:NT$30), is conducive to minimizing the disorder of the upstream sector of Taiwan’s LED industry.

Epistar executives pointed out the acquisition is a fairly conducive to the company in consideration that the company would have to spend at least NT$8 billion (US$266 million) to add a production capacity at the size of Huga’s to its in-house facilities.

Currently, Huga turns out an equivalent of 150,000 2-inch epitaxy wafers for making LED chips a month.

Huga executives stressed integration of the two companies rather than merger in the deal. They noted that if Huga became a defunct company after the deal, its partnership contract with Seoul Semiconductor would be abandoned. On the other hand, as Epistar wholly owns Huga, the two companies’ entry into the United States market would not be considered practicing fixing prices.