Hynix Semiconductor creditors were dealt a blow on Thursday when the only company to make a bid for a controlling stake in the South Korean chipmaker, worth about $3bn, withdrew its offer.
Hyosung, a mid-sized conglomerate focused on fibre and chemicals, said that rumours that it had received political favour in the bid process to buy a stake in Hynix were “groundless”.
But Hyosung said that the speculation had made it difficult to pursue a “fair” acquisition. Its chairman is distantly related to South Korean president Lee Myung-bak.
The move means that creditors led by Korea Exchange Bank will now have to restart the auction to offload their 28 per cent stake in Hynix.
Creditors had hoped to take advantage of a sharp rise in Hynix’s share price and an improved outlook for the industry to sell the stake this year.
Shares in Hynix, which on Thursday closed down 2 per cent at Won19,600, have nearly trebled this year.
KEB – which was among a group of creditors that rescued Hynix after it almost collapsed in 2001 under the weight of its debts – said on Thursday that it would send out invitations again to domestic companies and hold a new bidding for the chipmaker. It added that the process was likely to be prolonged.
Hynix is the world’s second-largest maker of memory chips, with a 21.7 per cent market share of the D-Ram market, after local rival Samsung Electronics.
The group last month said it returned to net profit in the third quarter after two years of losses as industry-wide production cuts boosted chip prices. It reported a net profit of Won254.4bn ($219m) in the July-September period, compared with a Won1,650bn loss a year ago.
The company is expected to report its highest profits in three years in the fourth quarter on higher chip prices.
D-Ram prices have almost quadrupled this year after falling about 60 per cent last year.
Analysts have said that the heavy investment requirements after acquiring the company, coupled with the high price tag and the industry’s cyclicality, deterred potential bidders.
Hynix plans to spend more than Won1,500bn in capital expenditure next year, compared with about Won1,000bn this year.
Shares in Hyosung closed up 15 per cent at Won79,100 on relief that the deal had not progressed.
Harsh Agarwal, an analyst at JPMorgan Chase, said in a report that there were limited synergies between Hyosung and Hynix. Hyosung might not have had the “required financial muscle to complete the acquisition independently”.
Hyosung’s market value is only about a quarter of that of Hynix.