Last one standing: SK Telecom pays $3B for 21% Hynix stake

November 14, 2011 – South Korean memory firm Hynix has finally found a buyer: SK Telecom, South Korea’s biggest wireless telco, will buy a 21% stake for roughly $3B.

Hynix’s nine creditors/shareholders, including the Korea Exchange Bank, Woori Bank, Shinhan Bank, and others, have been trying to pare down their ~28% involvement for years (KEB alone has a 15% stake). Offers for new ownership have come and gone from conglomerates Hyosung to Hyundai Heavy Industries. A 2002 proposal from Micron was approved by Hynix’s creditors but Hynix’s board rejected it.

This year, SK Telecom and shipbuilding group STX had been sniffing around the memory firm, but in late September talks fell through with STX ostensibly because of "economic uncertainties" ranging from Europe’s debt woes to the massive capital investments required to keep up in the memory business. That left SKT as the sole bidder (estimated as 3B won/$2.6B for a 20% stake). Extending the bidding deadline to Nov.10 generated no other participants.

Under disclosed terms, SKT will buy ~146.1M shares at 3.43B won (US $3.03B), representing 21.05% ownership in a cash/stock combination. The purchase is being split, roughly one-third being existing shares (44.25M at 24,500 won each, a ~14% premium) and two-thirds are for new Hynix shares to be issued (101.8M at 23,000 won, a 7% premium). There’s also a clause that could shave ~5% off the final purchase price. A due-diligence period could be completed by year’s end; KEB has expressed a desire to have everything wrapped up before the end of 1Q11.

For SKT, the move is mainly for diversification: "Hynix’s global business networks and its experiences in the memory business overseas will help SK Telecom’s efforts to launch diverse fixed-line and wireless platform businesses," the company explained in a statement. Hynix will represent nearly 10% of total company sales, and increase assets by ~16% (to ~113.1T won/$100B). Reports suggest SKT has about 2.76T won ($2.44B) in cash, and ~20T in total assets. Still, concerns linger about the volatility of the memory market and heavy capital investments required, as well as few synergies perceived in the two businesses. SKT top exec Ha Sung-min is on record saying Hynix will start focusing on system-on-chips, an area in which it is not currently competitive.


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