(LEAD) Hyosung confirms intention to buy Hynix stake

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By Kim Young-gyo
SEOUL, Sept. 23 (Yonhap) -- Mid-sized South Korean conglomerate Hyosung Corp.
confirmed Wednesday it is considering buying a major stake in the world's No. 2
memory chipmaker, but added no final decision has been made.

The company made the announcement in a regulatory filing, responding to a request
by bourse operator Korea Exchange to make public its position on media reports.
Many local media outlets reported earlier in the day as their top stories that
Hyosung Group was the sole party to submit a letter of intent to buy a stake in
Hynix Semiconductor.
Officials at Hynix's creditor banks said Tuesday that Hyosung Group 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). The deadline
for bids closed Tuesday.
The creditors said they plan to finalize the deal 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, Korea Exchange Bank 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. Its creditors have retained a controlling stake
since then, selling only a portion of what they held.
Market watchers, however, did not share Hyosung's enthusiasm and gave negative
responses to its bid for a major stake in Hynix.
Shares of Hyosung Corp., the group's flagship company, and Hynix Semiconductor
took a heavy battering on Wednesday. Hyosung closed at the lower limit of 84,400
won, plummeting by 14.92 percent from the previous session, while Hynix plunged
5.44 percent to 20,850 won.
Analysts said Hyosung's bid sent appalling signals that could damage the
conglomerate's image as a company with substance.
"Hyosung has been transforming itself from a chemical and textiles company into a
renewable energy and new materials company, restructuring overseas subsidiaries
with poor capabilities," said Kim Young-jin, a senior analyst at KB Investment
Co.
"Its bid for a Hynix stake will leave a stain on its name."
Kim added that Saumsung Electronics Co., the world's largest chip maker, might
rather benefit from the possible acquisition, consolidating its market leadership
by extending its gap on Hynix.
Some likened Hyosung and Hynix to "Goliath and David", saying Hynix will be be a
huge burden for Hyosung.
The value of Hyosung's total assets is estimated to be 8.4 trillion won, placing
the company in 30th place among South Korean business groups. Hynix's total
assets are estimated to be worth 13.38 trillion won.
"Based on Hyosung's debts and liquidity, Hyosung's acquisition of Hynix is
illogical," said Song Jong-ho, an analyst at Daewoo Securities Co. "A company
with a solid financial capability should acquire a memory chip maker, since the
industry is so volatile."
Hyundai Securities Co. said it will lower its valuation on the company, if
creditor banks in November finalize their preferred bidder as Hyosung.
Others questioned if Hyosung has a serious intention of buying the chipmaker,
saying its bid does not seem plausible.
"Without its experience in the semiconductor business, Hyosung will have a hard
time adapting itself to fluctuations of the memory chip industry," said Lee
Sun-tae, an analyst at Meritz Securities Co.
"The possibility of Hyosung's acquisition is very low. The process of searching
for the right buyer will prolong," Lee said.
U.S. Investment bank Goldman Sachs also said "successful completion of a stake
sale would be difficult," in its Wednesday report.
ygkim@yna.co.kr
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