LG details Hanaro plan

After announcing on Tuesday their partnership to try to gain control of Hanaro Telecom, LG Group and Carlyle Group yesterday detailed their official offering to purchase Hanaro’s shares, on better terms than the rival offer by an American International Group-Newbridge Capital consortium. LG, a leading conglomerate, and Carlyle, a U.S. based investment fund, said they agreed to pool a total of 1.5 trillion won ($1.3 billion) to invest in Hanaro, the second-largest high-speed Internet service provider in Korea. Hanaro reiterated its rejection, saying that the LG-Carlyle plan will push Hanaro to the brink of financial crisis because of the time gap between the maturity of its debts and its receipt of funds from the transaction. Jung Hong-shik, president of groupwide telecommunications operations at LG Corp., the financial holding firm of LG, and Kim Byung-ju, head of Carlyle’s Asian operation, said that the firms will each take a 25.5-percent stake in Hanaro. LG currently holds 18 percent of Hanaro. LG will invest 300 billion won and Carlyle 430 billion won to purchase Hanaro’s shares at 3,400 won per share. They also said that they received confirmation from Citibank that the bank will extend $700 million in loans to Hanaro. Compared to Hanaro’s own plan for an investment from the AIG-Newbridge Capital consortium, LG and Carlyle are putting up 280 billion won more in funds and are willing to pay 200 won more per share. LG and Carlyle said that they will sign a contract next month and put their plan to a vote at Hanaro’s shareholders meeting, probably in December. If the plan is approved, LG and Carlyle will provide 1.5 trillion won to Hanaro before the end of this year to improve Hanaro’s financial status and take over Korea Thrunet, the third largest broadband carrier. But Hanaro vice president Lee Jong-myung questioned the feasibility of the LG-Carlyle plan. “Considering that it usually takes 6 months to complete a due diligence, the actual time when the money is put into Hanaro will be around the second half of next year,” he said. “In the meantime, Hanaro will face a serious cash shortage crisis.” Hanaro has 300 million subscribers for its high speed Internet service, taking up 27 percent of the local market. Its next shareholders meeting is Monday. by Kim Hyo-jin