Hyundai Heavy CEO Mong Joon CHUNG brother of Hyundai Motors CEO Mong Koo CHUNG plan to take control over Hynix Semiconductor the formerly part of the Hyundai group which span off in 1997 during the Asian economic downturn. Hyundai Hynix creditors plan to approach investors this month to sell a stake in the South Korean chipmaker and could offer loans to potential bidders after failing to find a strategic buyer for 3 times.
Creditors rescued Hynix after it almost collapsed in 2001 under the weight of its debts. However, they have since struggled to find a local strategic buyer for Hynix, having excluded foreigners from the auction because of worries about sensitive technology information leaking outside of the country.
State-run Korea Finance, the chipmaker’s largest shareholder with a 5.5 per cent stake, said creditors aimed to sell their 20 per cent holdings, worth about Won3,120bn ($2.5bn) by current market value, by the end of this year.
Korea Finance said that to help overcome financing concerns, creditors would offer a credit line to a buyer to reduce their investment burden.
Creditors are eager to sell their remaining stake to recoup an original investment worth $4.6bn, as Hynix shares have gained 15 per cent this year after more than tripling in 2009 on rising chip prices.
Creditors have had tried three times in the past year to sell their stake in Hynix, the world’s second-largest memory chipmaker. But concerns about the huge investments required after acquiring the company are believed to have deterred potential buyers
The only company to have shown firm interest in buying Hynix was Hyosung, a mid-sized Korean conglomerate focused on fibre and chemicals. However, Hyosung dropped its bid for Hynix last year because of financing problems.
In March the creditor group offloaded a 6.7 per cent stake in Hynix for Won923.2bn through a block sale.
Creditors have said that if they cannot find a buyer for the rest of their stake by the end of this year, they plan to sell it to a private equity fund or in the market.
Hyundai’ Hynix recently announced a plan to raise its capital expenditure by a third to Won 3,050 billion this year to take advantage of a strong recovery in the global technology sector. It came after industry leader Samsung Electronics doubled its investment in semiconductors to Won11, 000 billion in an effort to cement its technology lead over rivals.
Unconnectedly, creditors are also looking to begin the sale this month of a stake in Hyundai Engineering & Construction, South Korea’s biggest builder. The Korea Finance-led group – which holds a controlling 38.6 per cent stake – aims to select a preferred bidder by as early as September.
Creditors took over Hyundai Engineering & Construction in the wake of the Asian financial crisis at the end of the 1990s. Korea Finance is the builder’s largest shareholder with an 11.2 per cent stake.
Shares in Hyundai Engineering have fallen more than 20 per cent so far this year due to the slump in the local construction industry.
Hyundai Heavy Industries, the world’s largest shipbuilder, is considering a bid for a controlling stake in Hynix Semiconductor worth about $2.8bn as creditors launch another attempt to sell the leading memory chipmaker
“We are looking at the sale with interest,” a Hyundai Heavy said, responding to market rumors that the shipbuilding giant would take over its former affiliate
Hyundai Heavy is looking to diversify their interests away from shipbuilding into electric power generation, but analysts say the deal could also reflect its desire to rebuild the family conglomerate, or chaebol. Hynix was formerly known as Hyundai Electronics.
Nine creditors-turned-shareholders, including Korea Exchange Bank, are planning to launch a sales process this month for a 15 per cent stake in Hynix, in their third attempt to find a strategic buyer in as many years.
The stake has a stock market valuation of $2.4bn but analysts estimate it is worth about $2.8bn because the rest of the shares are widely dispersed, giving the owner the chance to control the company.
Hyundai Heavy declined to comment on why it would be interested in Hynix but analysts said the shipbuilder apparently wants to rebuild parts of the former Hyundai family conglomerate, which had been split up in the aftermath of the Asian financial crisis in 1997 or Hyundai Heavy is just planning to continue their diversification as Hyundai Motor Groups did after acquiring the Hyundai Engineering & Construction .
“Some say that Hyundai Heavy wants Hynix for its renewable business such as solar power but it seems a little far-fetched,” said Jae Lee at Daiwa Securities. “There seems to be no clear business link but the company may want to take back part of the former Hyundai empire, like in the case of Hyundai Engineering & Construction.”
Hyundai Motor Group, a former affiliate of Hyundai Heavy Industries, this year took over Hyundai Engineering & Construction Last April 2011.