STX Group drops out of bids for Hynix Semiconductor

STX Group dropped out of the bid for Hynix Semiconductor on Monday.

The group, which was bidding for the world’s second-largest chipmaker against SK Telecom, said that the plans were scrapped due to global economic instability and for fears that the large investment required to strengthen Hynix’s operations could weigh the group down.

The shipbuilding conglomerate also said that delays in reaching an agreement with the Middle Eastern investment fund also contributed to the decision.

To finance the deal, which would take upward of 2 trillion won ($1.76 billion), STX Group had been in talks with Aabar Investment, which is owned by the Abu Dhabi government, to provide part of the funds.

In a statement, STX Group said that despite the change in plans, the group will continue to seek to bring in overseas funds for the purpose of strengthening its global business.

Aided by the news that STX Group may be scrapping related plans, STX companies’ traded on the KOPSI faired well on Monday.

STX Corp. shares closed at 16,300 won ($14.3), up 3.82 percent from Friday, while STX Offshore and Shipbuilding Co. and STX Metal Co. respectively rose 2.08 percent and 0.5 percent. STX Engine Co. also increased 4.14 percent to close at 21,400 won.

STX Pan Ocean Co. was the only one to slip, closing at 8,510 won, down 3.62 percent compared to Friday.

While investors appear to welcome the news, related developments are fueling worries at Hynix.

A source close to the deal said that while those within Hynix have heard of financing difficulties at STX, those within the chipmaker have shown concerns that STX dropping out could drive the acquisition price down.

While STX shares rose, market watchers said that they are unlikely to continue on the rise.

“The rise will be short lived as it is mostly caused by the news that STX may be dropping the acquisition plan. But with poor outlook for the group’s main business ― shipbuilding ― the prices are not likely to continue rising,” SK Securities Co. analyst Lee Ji-hoon said.

In addition to STX Group’s apparent lack of synergy with Hynix, the conglomerate’s financing plans have also raised ire among the chipmaker’s labor union.

The chipmaker’s union recently informed the company’s creditors that they are opposed to the company being sold to “foreign capital.”

For its part SK Telecom is to remain firm on its course for now.

“The due diligence was completed on Sept. 9 and the company will work on issues including (outlook on) semiconductor prices until the deadline for the binding bid on Oct. 24,” a SK Telecom official said, adding that the company has no official position regarding STX Group.

SK Telecom shares dropped 3.45 percent to close at 154,000won.

By Choi He-suk  (cheesuk@heraldcorp.com)