By Kim Da-ye
It came down to two bidders in dire need of growth engines. By appearances, one is far bigger than the other with the outcome as good as pre-determined, but in an M&A deal this is not always the case.
SK Telecom, Korea’s largest mobile operator and STX Group, which owns the world’s fourth largest shipbuilder, submitted bids to buy a 15 percent stake in Hynix Semiconductor, Friday.
The move came as SK Group Chairman Chey Tae-won and STX Group Chairman Kang Duk-su are looking for new growth engines.
The deadline was 4 p.m., and the companies met it narrowly after a series of firms allegedly interested in the world’s second largest computer memory chip maker dropped out.
Hyundai Heavy Industries, which had initially showed an interest in a 15 percent stake of Hynix, decided Wednesday not to bid while KCC vehemently denied the rumor that it had considered buying it.
The market had speculated SK Telecom could form a consortium with its sister firm SK Innovation.
Choi Yun-mee, an analyst at Mirae Asset Securities, said that the purchase of the 15 percent stake would cost about 2.5 billion won. She added SK Telecom wouldn’t have difficulties in financing the deal because it has cash reserves of 1.5 trillion won and will have free cash flow of more than 1.4 trillion won this year.
Choi, however, wasn’t convinced about the future gains from the acquisition.
“The synergy effects created between SK Telecom’s mobile and content business and the memory chip company will be limited. There are also concerns over inefficient management because of SK’s lack of experience in the semiconductor business,” Choi said.
An industry source close to the group said that the acquisition was more about developing a new growth engine for the company as the mobile market is fully saturated.
SK Group, in fact, set up a joint business called SK Mtek with Korean semiconductor firm Mtekvision in China to enter to the market.
STX Group first revealed Wednesday its interest in the semiconductor firm with Vice Chairman Lee Jong-chul telling reporters that the group might invite a Middle Eastern fund to finance half of the deal.
Lee mentioned that the acquisition of Hynix could reduce its heavy dependency on shipbuilding and shipping.
Acknowledging that there would be little synergy between Hynix and the group’s key businesses, he said the growth potential and profitability of a company to be acquired should be prioritized.
STX Group has a colorful history of M&As. It bought in 2001 Daedong Shipbuilding, currently STX Offshore & Shipbuilding, and in 2002 Sandan Energy, now STX Energy. Two years later, it bought Pan Ocean Shipping, which was renamed STX Pan Ocean.
Creditors of Hynix led by the Korea Exchange Bank (KEB) plan to select a preferred bidder in early September and complete the sale by the end of the year.
Until then it isn’t clear who’s going to be the new owner of what was formerly Hyundai Electronics, which was part of Hyundai Group until 2001.
Hyosung, a conglomerate engaged in textile and chemicals, dropped its bid for a 28 percent stake in Hynix back in 2008, citing the lack of synergy between the two companies.
In February 2010, creditors’ attempt to sell the stake failed as they received no letters of intent.
Hynix, however, has grown strong since with its sales grew from 7.91 trillion won in 2009 to 12.1 trillion won last year, and operating profit from 192 billion won to 3.27 trillion won.