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June 8, 2011 3:36 pm

Hyundai Heavy eyes bid for Hynix

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Hyundai Heavy Industries, the world’s largest shipbuilder, is considering a bid for a controlling stake in Hynix Semiconductor worth about $2.8bn as creditors launch another attempt to sell the leading memory chipmaker.

“We are looking at the sale with interest,” a Hyundai Heavy said, responding to market rumours that the shipbuilding giant would take over its former affiliate.

Hyundai Heavy is looking to diversify its interests away from shipbuilding into electric power generation, but analysts say the deal could also reflect its desire to rebuild the family conglomerate, or chaebol. Hynix was formerly known as Hyundai Electronics.

The news pummelled shares of Hyundai Heavy due to concerns that there were few synergies between the two companies. Its shares closed down 6 per cent at Won466,000 while Hynix gained 1 per cent to close at Won28,900.

Nine creditors-turned-shareholders, including Korea Exchange Bank, are planning to launch a sales process this month for a 15 per cent stake in Hynix, in their third attempt to find a strategic buyer in as many years.

The stake has a stock market valuation of $2.4bn but analysts estimate it is worth about $2.8bn because the rest of the shares are widely dispersed, giving the owner the chance to control the company.

Hyundai Heavy declined to comment on why it would be interested in Hynix but analysts said the shipbuilder apparently wants to rebuild parts of the former Hyundai family conglomerate, which had been split up in the aftermath of the Asian financial crisis in 1997.

“Some say that Hyundai Heavy wants Hynix for its renewable business such as solar power but it seems a little far-fetched,” said Jae Lee at Daiwa Securities. “There seems to be no clear business link but the company may want to take back part of the former Hyundai empire, like in the case of Hyundai Engineering & Construction.”

Hyundai Motor, a former affiliate of Hyundai Heavy, this year took over Hyundai E&C after a heated family battle to take control of the country’s largest building group.

“It is hard to see any clear synergy from the deal but Hyundai Heavy may see some merit in that it could take control of a sizeable company at a relatively low cost,” said Han Young-soo at Samsung Securities.

Creditors have struggled to find a local buyer for Hynix after rescuing the chipmaker, which almost collapsed in 2001 under the weight of its debts. Their last efforts in early 2010 failed to attract any bidders. Potential buyers were deterred by the semiconductor industry’s volatile business cycle and heavy capital requirements.

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