Hynix suitor exits, leaving only one

September 20, 2011 - One of two suitors to take a major stake in Korea’s Hynix Semiconductor has bowed out of the running, leaving just one suitor for the planet’s second-largest memory chipmaker in the latest push by creditors/owners to slough off some of the burden.

Earlier this summer STX was mulling a stake in Hynix possibly with a Middle Eastern financial partner. Those talks apparently fell through, however, and so the company cites "economic uncertainties" fed by Europe’s debt woes, such that the required investments just to keep up in the memory business "would have pressed us financially," the company stated.

Multiple deadlines have come and gone over the past few years to obtain suitors for Hynix, with all of them eventually falling by the wayside, from conglomerates Hyosung to Hyundai Heavy Industries. Micron’s offer in 2002 was approved by Hynix’s creditors but was rejected by Hynix’s board. Shipbuilding group STX and SK Telecom are the latest to sniff around the memory firm, in which the Korea Exchange Bank has a 15% stake it’s been trying to offload for years.

So what happens next? Yet another deadline to receive bids comes on Oct. 24; the nine Hynix creditors/shareholders (including the KEB, Woori Bank, Shinhan Bank, and others) hope to resolve a new deal by November. Local media reports that SK Telecom is now the only bidder left for a 20% stake in Hynix, valued at roughly 3 trillion won (US $2.6B), and Hynix reportedly is worried that its leverage will evaporate with just one bidder, and the price will go down. For its part, SK Telecom is shrewdly staying neutral, saying only that it has completed due diligence and will continue to examine factors such as ASPs right up until the Oct. 24 deadline for bids in order to "make a reasonable decision".

Options for new investors are somewhat limited, though, since there is a groundswell of support to keep the company away from "foreign capital." The flip side, though, is that pursued ownership by domestic conglomerates is raising fears of overexpansion by chaebols, a practice that led to heavy debt and ultimately financial crisis in the 1990s.

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