Hyosung Group bids for Hynix stake

SEOUL, Sep 23, 2009 (Asia Pulse Data Source via COMTEX) -- KOOQF | Quote | Chart | News | PowerRating -- 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."

More News:   Market Updates | Stock Alerts | All Trading News | Stock Index