Plot thickens in delayed Hynix sale

Speculation is building in the industry that SK Telecom, Korea’s No.1 mobile carrier, is having second thoughts about its bid for Hynix - the world’s second-largest memory chipmaker.

This comes as SK Group, SK Telecom’s parent company, being investigated amid allegations that the founding family misappropriated company funds.

“It is true that we are having concerns about the bid [due to the probe],” an SK Telecom official told the Korea JoongAng Daily yesterday afternoon. “But nothing has been decided at the moment.”

Another official told Yonhap News Agency that he was cautious about linking the bid with the investigation.”

“But it is true that we want to be very discreet as the investigation has come about before an important managerial decision such as the prospective acquisition.”

The creditors provided $4.6 billion to rescue the chipmaker in 2001-02 by swapping their debt holdings for shares during one of the industry’s worst downturns.

SK Telecom is the sole bidder for 20 percent of Hynix shares up for sale. The deadline for the bid ends today.

Market insiders say that SK Telecom will hold a meeting for the board of directors today and make up its mind on whether it is still in the race.

Observers who predict that SK Telecom will withdraw its bid add to their argument how Hynix shares have surged in recent weeks, as well as how SK Telecom has seen its operating profit plunge.

Hynix shares rose about 50 percent in the last three months as the bidding process dragged on, and SK Telecom’s third-quarter earnings dropped 18 percent from one year ago due to increased spending on wireless networks.

Past attempts by Hynix creditors to sell the stake have met with an underwhelming response, mainly as a result of the industry’s volatile nature and the huge investment required in order to be competitive.

In November 2009, Hyosung, the sole bidder in the first attempt, dropped out of the race amid rumors that a government sweetener had been a part of its decision to bid. And in February 2010 the creditors attracted no bidders.

In September of this year, the Korean shipbuilding and shipping conglomerate STX dropped its bid citing global uncertainties such as the size of future investments, leaving SK Telecom as the sole contender.

Now Hynix creditors are adopting a wait-and-see approach, which may be the only viable option given that such speculation emerged just days before the final bid deadline.

They have already pushed back the deadline twice as they attempted to lure fresh bids, with the first delay occurring for the two weeks ending Nov. 3 and the second lasting a week and concluding on Nov. 10.

An official from one of the Hynix creditors said yesterday afternoon that “we haven’t received any notification from SK Telecom,” adding that, “we will go ahead with receiving the final bid today as originally planned.”

Yet some observers believe SK Telecom will go ahead with the bid despite the prosecutor’s investigation.

“Of course the probe raises uncertainties for the company’s management, but the decision to compete for the bid was made based on a long-term perspective,” a source at the SK Group was quoted as saying by Korean media.

Hynix, formerly known as Hyundai Electronics, used to belong to the Hyundai Group. It incurred substantial debt during the 1997-98 financial crisis and acquired LG’s semiconductor unit in 1999, after the government forced companies to merge in what came to be known as “the big deal.”

By Kim Hyung-eun [hkim@joongang.co.kr]