SK pulls out of Elpida deal
SK hynix, the world’s second-biggest memory chipmaker, has dropped its ambitious bid for Elpida Memory, the Tokyo-based chipmaker that had filed for bankruptcy in February.
The Icheon, Gyeonggi Province-based chipmaker has blamed Toshiba’s decision to drop its joint bid for Elpida was one crucial reason that forced SK hynix to drop the plan, according to SK hynix officials.
``SK hynix’s board decided not to participate in the second round of bidding for the bankrupt Japanese chipmaker. Board members reached a consensus that Elpida has no strategic value,’’ said SK hynix Chief Executive and SK Group Chairman Chey Tae-won in a meeting with reporters at SK hynix’s main office in downtown Seoul.
With Chey, another SK hynix CEO Kwon Oh-chul, SK hynix board chairman Ha Sung-min, the company’s chief technology officer Park Sung-woo attended the meeting, which lasted two hours from 11 a.m.
``The withdrawal from Elpida doesn’t mean SK hynix would be passive in mergers and acquisitions. But currently, acquiring Elpida is against our strategy,’’ Chey told reporters.
SK hynix initially wrote 2 trillion won in the first round of the bidding, last month, in an attempt to boost its chip business for data-intensive digital gadgets such as tablets and smartphones, according to SK hynix officials.
The SK chairman Chey didn’t elaborate further. But sources who were involved in the deal told The Korea Times that chances had been cut for the acquisition of Elpida right after Toshiba’s refusal for the joint bid. Toshiba approached SK hynix for a joint bid and the two companies held initial talks.
``It’s true that the break-up in talk with Toshiba was one fact,’’ said SK hynix spokesman Son Kyung-bae, adding the time was too short for the company to analyze the values of Elpida and to check key data.
Toshiba representatives in Korea declined to comment.
Also Elpida’s main creditors are also planning to scrap the ongoing auction as current bidders may offer no more than $2 billion for Elpida, while creditors are asking for at least $3 billion to $4 billion.
``Cash was also the top consideration. If a bidder buys Elpida, the company should spend more than $3 billion in the next 18 months to help Elpida see business normalization. We agreed that that’s too risky,’’ another SK hynix official said.
Shareholders and investors for SK hynix also opposed the acquisition plan. SK hynix shares have been falling since the company submitted its initial bid to Nomura Securities, lead manager for the deal, the official said.
SK hynix reported its third straight quarterly operating losses in April hit by less demand for chip-embedded products amid the aftermaths of European debt-crisis and slow economic recovery in the United States, which is the world’s biggest consumer electronics market.
``Buying Elpida is too much for SK, currently. The withdrawal from the deal will help SK hynix strengthen its bottom line and regain investor confidence as the benchmark chip prices are rising with major set makers rising their inventories ahead of the back-to-school season in fall,’’ said Shin Hyun-joon, an analyst at Dongbu Securities.