SKT to go ahead with Hynix deal
By Kim Yoo-chul
SK Telecom, the nation’s biggest mobile phone service operator, has decided to move ahead with its bid for Hynix Semiconductor, a mega deal valued at over 3 trillion won.
``SK Telecom’s board has decided to go ahead with the Hynix deal. We’ve submitted the necessary documents to Credit Suisse, the lead manager,’’ SK Telecom said in a regulatory filing to the Korea Exchange (KRX) late Thursday.
``We had a heated debate on whether to continue with the deal, but decided SK Telecom still needs Hynix,’’ said Park Jeong-ho, a senior executive, in a meeting with reporters in Yeouido, where Credit Suisse’s Seoul branch is located.
The announcement comes to counter speculation that the Seoul-based outfit was giving up on the world’s No. 2 chipmaker amid an investigation into embezzlement by founding family members of the SK Group.
Hynix’s labor union welcomed the decision. ``We respect SK’s decision. SK Telecom is qualified to run the chip business and we hope SK Telecom will be chosen,’’ Park Tae-suk, the head of the union, told The Korea Times by telephone.
Shareholders of the semiconductor manufacturer, led by Korea Exchange Bank (KEB), are widely expected to accept the offer. Its board will hold a meeting soon to approve an earlier plan to issue 101.85 million new shares.
The shareholders previously said they were planning to sell existing shares and the newly-issued ones so that the buyer can secure a 20-percent share and managerial rights.
``KEB will publicly announce its decision today,’’ said the bank. SK Telecom is the only company left looking to buy Hynix after STX Group pulled out.
SK Telecom is desperate to find its new cash cow as the local telecom market is saturated. Its CEO Ha Sung-min said the acquisition will help do this.
SK’s previous attempts at business in international markets have failed to yield success. From China, Vietnam to the U.S., SK had suffered heavy losses, resulting in it looking at Hynix, which has advanced chip-making technology and maintains solid relations with China.
Hynix runs a cutting-edge chip-making plant in Wuxi, Jiangsu Province, which is regarded as a ``successful business model’’ for a foreign company because the Chinese authorities granted greater tax benefits, and administrative and other financial-related support for it.
``Amid the rises of data-intensive digital devices including tablets and smartphones, SK Telecom has a plan to put more resources on strengthening non-memory business as the sector is profitable and lucrative compared to the volatile and cyclical memory business,’’ said a top-ranking SK executive who is directly involved with the Hynix deal, requesting anonymity.
However, questions are being asked as to whether SK Telecom can complete deal amid the deepening investigation by the prosecution into wrongdoings by SK owner family members.
Seoul prosecutors have been investigating SK Group Chairman Chey Tae-won since May this year see if he took money from SK affiliates to dilute his personal losses from futures investments.
``It’s possible that SK Telecom may offer a lower price for Hynix, which may be unacceptable to shareholders as it’s grappling with the so-called `owner risk’ in management. SK seems desperate for Hynix. But I am not sure,’’ said an official from one of Hynix’s shareholders over the telephone.
The rising price of Hynix shares was also pointed out as another drawback to possibly hamper SK’s bid for the chipmaker, according to the official.
The semiconductors business is labor- and cash-intensive ― usually more than 1.5 trillion won is needed just for technology upgrades and maintenance for fabrication.
The investigation into SK Group Chairman Chey comes less than four years after the nation’s highest court reaffirmed a suspended sentence for Chey. In May 2008, the Supreme Court upheld a suspended three-year prison term for fraud.