South Korea's STX Corp said on Monday it decided to pull out of its bid for Hynix Semiconductor Inc , throwing a potential deal worth $2.2 billion into uncertainty.
In July, shipping-to-shipbuilding group STX and SK Telecom Co Ltd , South Korea's top mobile carrier, submitted letters of intent for control of the world's No.2 computer memory chipmaker, which has been struggling to find a new owner for years. .
"We have decided to stop pushing for the Hynix acquisition because of global economic uncertainty and the investment burden to improve the competitiveness of the chip business," STX said in a regulatory filing.
STX Group-related stocks rallied on Monday after local media reported that an internal report by STX Corp had concluded that the risks associated with a takeover of Hynix Semiconductor were higher than originally expected.
Shares in STX Corp jumped 3.8 percent on Monday, and STX Engine Co Ltd rose 4.1 percent. Hynix ended down 4.1 percent and SK Telecom was down 3.5 percent.
Hynix shareholders, which planned to receive final bids by Oct 24, will meet to decide whether to allow SK Telecom as a lone bidder. A SK Telecom spokeswoman said Hynix shareholders should proceed with sales as planned and it would make a "reasonable decision" on whether to make a final bid.
"Hynix creditors have no choice but to sell the chipmaker to SK Telecom because a chance is low that other bidders will join. The situation will be favourable to SK Telecom," said Song Jong-ho, an analyst at Daewoo Securities.
Creditors are auctioning 20 percent of Hynix shares, worth 2.5 trillion Korean won ($2.2 billion) at the current market value, as they seek to recoup billions of dollars they injected in the early 2000s following the Asian financial crisis.
Out of the total stake up for sale, 14 percent will come in the form of new shares issued by Hynix, and 6 percent will be offered by creditors-turned-shareholders.
They have since scaled down their stake but failed several times to complete a full sale, with investors avoiding a risky jump into the capital intensive, cyclical memory chip sector.
The memory chip sector has been also grappling with sluggish PC demand and the global economic uncertainty, which has sent down chip prices by about a third over the past year.
STX had teamed up with state-owned Abu Dhabi fund Aabar to fund around half of the investments needed for Hynix purchase.
"Negotiations over details of the Abu Dhabi fund's investment plan had virtually collapsed," an STX Group official said, adding that this was one of the reasons it had decided to quit the Hynix bid.
Hynix shareholders will meet to decide whether to allow SK Telecom as a lone bidder, said an official at lead shareholder Korea Exchange Bank , adding that the sale process was based on the principle of valid competition, meaning it needed multiple bidders in the final round.
Shareholders had previously said they would send a invitation letter to the bidders around Sept. 21 and that they aimed to pick a preferred bidder in late October before signing a sales deal in November.
In July, shipping-to-shipbuilding group STX and SK Telecom Co Ltd , South Korea's top mobile carrier, submitted letters of intent for control of the world's No.2 computer memory chipmaker, which has been struggling to find a new owner for years. .
"We have decided to stop pushing for the Hynix acquisition because of global economic uncertainty and the investment burden to improve the competitiveness of the chip business," STX said in a regulatory filing.
STX Group-related stocks rallied on Monday after local media reported that an internal report by STX Corp had concluded that the risks associated with a takeover of Hynix Semiconductor were higher than originally expected.
Shares in STX Corp jumped 3.8 percent on Monday, and STX Engine Co Ltd rose 4.1 percent. Hynix ended down 4.1 percent and SK Telecom was down 3.5 percent.
Hynix shareholders, which planned to receive final bids by Oct 24, will meet to decide whether to allow SK Telecom as a lone bidder. A SK Telecom spokeswoman said Hynix shareholders should proceed with sales as planned and it would make a "reasonable decision" on whether to make a final bid.
"Hynix creditors have no choice but to sell the chipmaker to SK Telecom because a chance is low that other bidders will join. The situation will be favourable to SK Telecom," said Song Jong-ho, an analyst at Daewoo Securities.
Creditors are auctioning 20 percent of Hynix shares, worth 2.5 trillion Korean won ($2.2 billion) at the current market value, as they seek to recoup billions of dollars they injected in the early 2000s following the Asian financial crisis.
Out of the total stake up for sale, 14 percent will come in the form of new shares issued by Hynix, and 6 percent will be offered by creditors-turned-shareholders.
They have since scaled down their stake but failed several times to complete a full sale, with investors avoiding a risky jump into the capital intensive, cyclical memory chip sector.
The memory chip sector has been also grappling with sluggish PC demand and the global economic uncertainty, which has sent down chip prices by about a third over the past year.
STX had teamed up with state-owned Abu Dhabi fund Aabar to fund around half of the investments needed for Hynix purchase.
"Negotiations over details of the Abu Dhabi fund's investment plan had virtually collapsed," an STX Group official said, adding that this was one of the reasons it had decided to quit the Hynix bid.
Hynix shareholders will meet to decide whether to allow SK Telecom as a lone bidder, said an official at lead shareholder Korea Exchange Bank , adding that the sale process was based on the principle of valid competition, meaning it needed multiple bidders in the final round.
Shareholders had previously said they would send a invitation letter to the bidders around Sept. 21 and that they aimed to pick a preferred bidder in late October before signing a sales deal in November.
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