Hyosung drops bid to acquire Hynix

(ATTN: ADDS stock prices, KEB response in para 6-7)
By Nam Kwang-sik
SEOUL, Nov. 12 (Yonhap) -- South Korea's Hyosung Group said Thursday it has
decided to drop its takeover bid for Hynix Semiconductor Inc. due to rumors
government ties may have influenced the bid.
In September, Hyosung Corp., the conglomerate's flagship unit, submitted a letter
of intent for the purchase of a 28.07-percent stake in Hynix -- which would make
it the largest shareholder of the world's No. 2 chipmaker.
But controversy over the deal has scuppered the chance for a clean takeover, the
company said.
"We made a very painful and difficult decision to withdraw our bid for Hynix as
various unfounded rumors including those suggesting government favor for our bid
have made it difficult for us to seek a fair takeover," Hyosung said in a
regulatory filing.
The comments were in reference to speculation that in-law relations between
President Lee Myung-bak and the Hyosung chairman may have had influence on the
group's takeover bid. The rumors stemmed from the fact that the group's assets
are smaller than the troubled chipmaker.
After the announcement, shares of Hyosung spiked briefly to close 14.8 percent
higher at 79,100 won (US$68.3). Hynix fell 1,75 percent to 19,600 won.
Upon Hyosung's announcement that it was scrapping the deal, the Korea Exchange
Bank (KEB), the main creditor of Hynix, said it will hold a meeting with other
creditors on Monday to re-offer the stake to public tender.
Insider sources, however, said that it may be difficult to resume the bidding
until the latter half of next year as corporate heavyweights like Daewoo
International Corp. and Daewoo Shipbuilding & Marine Engineering Co. have
recently been put up for sale.
A lack of interest in buying the stake is another main reason for the delay of
the sale, they added.
But Hyosung's pullout will have almost no negative impact on Hynix, an official
at the creditor said.
"Hynix will be able to secure 1.5 trillion won (US$1.29 billion) in cash by the
end of this year thanks to rising DRAM prices and sales," the officials said.
Hynix later echoed the view that the withdrawal would not affect its business
plan for next year.
"The pullout does not change our plan for the next year," said a Hynix spokesman.
"As the stake sale is between shareholders and Hyosung, we have no other
comment."
Hynix reported its first quarterly profit in two years in the third quarter, with
operating profit coming to 209.3 billion won. Sales gained 15 percent on-year to
2.12 trillion won during the same period.
After submitting the LOI, Hyosung failed to meet an original mid-October deadline
for a preliminary bid, and Hynix creditors extended the deadline until the end of
last month.
On Nov. 2, Hyosung called for another extension of the deadline for a preliminary
bid, claiming it needs more time to pick an advisory firm, finalize its bid terms
and prepare for a subsequent due diligence. Hyosung was scheduled to submit the
preliminary bid by Nov. 16.
Hynix was put under joint supervision by creditors in October 2001 as a slump in
the global chip market plunged it into a credit crunch. KEB and other creditors
injected $4.6 billion to bail out Hynix by swapping the chipmaker's debts for
equity between 2001 and 2002.
Hynix ended its debt workout program in May 2005. Creditors have retained a
controlling stake since then, selling only a portion of what they held.
ksnam@yna.co.kr
pbr@yna.co.kr
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