Hyosung Group bids for Hynix stake

(ATTN: UPDATES throughout; ADDS more info from para 11)
By Kim Young-gyo
SEOUL, Sept. 22 (Yonhap) -- South Korean conglomerate Hyosung Group has submitted
a bid for a major stake in Hynix Semiconductor Inc., the world's No. 2 memory
chipmaker, credit bank officials said Tuesday.
Hyosung with business interests ranging from chemicals to heavy machinery was the
only bidder for the 28-percent stake estimated at 3.65 trillion won (US$3.04
billion), Korea Exchange Bank (KEB) officials said. The deadline for bids closed
at 5:00 p.m. Tuesday.
Creditors earlier claimed four or five domestic companies had expressed their
intent to invest in Hynix. Invitations for bids for the combined 28-percent stake
in the company were sent to only 43 South Korean companies about two weeks ago.
KEB said it will select a preferred bidder by the end of November after
conducting due diligence on Hyosung and receiving a final bid from the
conglomerate.
Hynix was put under joint supervision by creditors in October 2001, when it faced
a credit crunch amid a faltering semiconductor business climate.
From 2001-2002, KEB and other creditors injected $4.6 billion to bail out Hynix
by swapping the chipmaker's debts for equity.
Hynix ended its debt workout program in May 2005, after the company raised $1.25
billion to pay off its debt. Creditors have retained a controlling stake since
then, selling only a portion of what they held.
Shares of Hynix closed Tuesday up 2.8 percent at 22,050 won.
The company reported its seventh straight quarterly loss of 58 billion won in the
second quarter, compared with a 711 billion won loss a year earlier. Some
analysts expect it will go back to black in the third quarter due to a recovery
in computer memory chip prices.
The stake sale is being managed by Credit Suisse Securities Ltd., Woori
Investment & Securities Co. and the state-run Korea Development Bank.
Hyosung is headed by Cho Suck-rai, who doubles as the chairman of the Federation
of Korean Industries, the nation's largest business lobby. Cho is well-known as
the brother of one of President Lee Myung-bak's in-laws.
The value of Hyosung's total assets is estimated to be 8.4 trillion won, placing
the company in the 30th place among South Korean business groups. Hynix's total
assets are estimated to be worth 13.38 trillion won.
Market watchers, however, did not have a rosy outlook on the conglomerate's
potential acquisition of Hynix.
"It is not surprising to see that only one company participated in the bid. There
has been consensus in the market that buying Hynix will not be easy due to the
acquisition expense and the volatile semiconductor market," said Song Myung-seop,
an analyst at Hi Investment and Securities Co.
Some analysts questioned the synergy between the two companies.
"Hyosung is a company that mainly produces current transformers, voltage
regulators and tire cords. It has nothing to do with semiconductors," said Park
Dae-yong of Hyundai Securities Co.
"If Hyosung is to buy Hynix, it needs to have 4 trillion won at least, but as for
now, it does not appear to have that kind of capability," Park said. "Hynix is
too big for Hyosung and is likely to be a burden."
Some analysts declined to comment immediately.
"If a sound company that can endure the volatility of the semiconductor industry
buys Hynix, it will have a positive impact," said Lee Ka-geun, an analyst at IBK
Investment and Securities Co. "However, I do not know much about Hyosung and
wonder what kind of impact it will have on Hynix."
ygkim@yna.co.kr
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