South Korea’s Hyosung Group said Thursday it has decided to drop its takeover bid for Hynix Semiconductor due to rumors government ties may have influenced the bid.

In September, Hyosung, 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.

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.

YonhapNewsAgency

No related posts.