STX Plans Bid With Middle East Sovereign Fund for $2.2 Billion Hynix Stake

STX Group, owner of the world’s third-largest marine-engine maker, said it may team up with a Middle Eastern sovereign wealth fund to bid for a stake in Hynix Semiconductor Inc. (000660)

STX is “highly likely” to submit a bid before tomorrow’s deadline set by shareholders including Korea Exchange Bank, the group said in an e-mailed statement yesterday. It wouldn’t need to borrow to pay for a stake of about 15 percent, according to Vice Chairman Lee Jong Chul, who didn’t identify STX’s potential Mideast partner.

The decision breathes life back into a sale that appeared on the verge of collapsing for the fourth time in two years when Hyundai Heavy Industries Co. ruled out a bid. The stake in Hynix, the world’s second-largest maker of DRAM semiconductors used in personal computers and smartphones, was valued at 2.36 trillion won ($2.2 billion), based on the stock’s closing price yesterday.

“It seems more likely than in previous attempts that Hynix is going to find an owner this time,” David Choi, an analyst with KTB Investment & Securities Co., said by telephone. “It would be good for Hynix to have an owner as it can focus more on growth and make decisions for strategic investments.”

Hynix was bailed out by creditors including Korea Exchange Bank and Woori Bank in 2001. They swapped debt for equity and have failed three times since 2009 to offload their stake.

Technology Deals

The disposal would be the largest share sale of a South Korean technology company since July 1999, when Hynix bought a majority holding in Hyundai Microelectronics Co. for 2.56 trillion won, according to data compiled by Bloomberg.

“We are always looking for opportunities to grow and we believe this deal could help STX reduce the group’s dependency on shipping and shipbuilding,” STX’s Lee told reporters last night. “We plan to make a rational offer if we decide to bid.”

STX Offshore & Shipbuilding Co., the world’s fourth-largest shipyard, led STX Group companies lower in Seoul, falling as much as 11 percent. It traded down 5.4 percent at 27,300 won at 9:47 a.m. in Seoul. STX Corp., which will lead the group offer if a bid goes ahead, dropped as much as 9.1 percent.

Buying Hynix would be STX Group’s biggest acquisition. It acquired Aker Yards ASA, Europe’s largest shipyard, for about 1.4 trillion won in 2007.

‘Little Synergy’

STX Offshore started trading in Seoul in October 2003, two years after it was taken over by the group, and STX Pan Ocean Co. debuted on the bourse in July 2005 after being bought in November 2004.

“Given little synergy can be seen, it could hurt the share prices of STX Group affiliates unless they provide the market with a good explanation for a bid,” said Kim Do Joon, a portfolio manager who helps manage 1.8 trillion won in equities at Hanwha Investment Trust Management Co. in Seoul.

Hyundai Heavy, the world’s largest shipbuilder, gained for a second day after abandoning a plan to bid for Hynix yesterday. The stock climbed as much as 2.5 percent.

Adding the chipmaker to existing businesses would create “little synergy,” Ulsan, South Korea-based Hyundai Heavy said.

Hynix gained as much as 2.6 percent to 27,200 won in Seoul.

SK Group Undecided

SK Group, parent of the nation’s biggest oil refiner and mobile-phone operator, said it hasn’t decided whether to bid. Hyosung Group, Dongbu Group and LG Group aren’t planning to bid for Hynix, the companies said in separate regulatory filings yesterday after the stock exchange requested clarification on market speculation.

Hyundai Heavy’s possible interest in Hynix was driven by a desire to rebuild South Korea’s family-owned conglomerates, known as chaebol, rather than any business rationale, according to Mirae Asset Securities Co. and CLSA Asia-Pacific Markets. The shipbuilder and Hynix’s predecessor were both part of the old Hyundai Group.

Hyundai Heavy also owned shares in Hynix before the shipyard severed ties with Hyundai Group in 2002.

Hynix needs to be sold to a company with a stable cash flow, given the volatile nature of the chip business, said Im Jeong Jae, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $29 billion.

Hynix posted record sales and profit in 2010, helped by cost cuts and demand for chips used in mobile devices, leading the company to pay a cash dividend to investors for the first time. It reduced debt by more than 1 trillion won last year and had more than 2 trillion won in cash, according to the company.

The chipmaker plans to spend about 3.4 trillion won this year expanding production and upgrading factories, after investing 3.38 trillion won in capital expenditure in 2010.

To contact the reporters on this story: Kyunghee Park in Seoul at kpark3@bloomberg.net; Jun Yang in Seoul at Jyang180@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net.

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