Hyundai Heavy drops Hynix bid plan

SEOUL: South Korea's Hyundai Heavy Industries said on Wednesday it would not bid for a 15 percent stake in Hynix Semiconductor , putting the potential $2.3 billion deal in jeopardy again and boosting Hyundai's shares nearly 9 percent.

Concerns about exposure to the notoriously volatile chip industry and synergies between the world's No.1 shipbuilder and No.2 chipmaker have pressured Hyundai Heavy's shares in recent weeks.

"We have decided not to submit a letter of intent for Hynix," Hyundai Heavy said in a filing to the Korea Exchange.

The firm said in a separate statement that the move was based on the view there would be few synergies between its business and the chip sector. Hyundai has been the sole potential investor to publicly express interest in Hynix.

The move, just ahead of Friday's initial bid deadline, leaves the third sales attempt by creditors-turned-shareholders of Hynix in jeopardy. Its shares fell more than 4 percent on Wednesday.

The stake sale may not be completely dead after SK Holdings , the holding company for a telecoms-to-refining conglomerate and the shipbuilding-to-shipping group STX Corp , told the stock exchange they have yet to decide on bidding for the stake.

An official at Korea Exchange Bank , which is a part of the selling shareholder group, said they will go ahead with the original auction schedule.

Creditors rescued Hynix from a debt crisis in 2001, stemming from one of the industry's worst downturns. They have since scaled back their stake, but have failed to complete a full sale with investors reluctant to jump into the cyclical memory-chip sector.

They have been tapping Korea's big business groups to attract bidders and planned to allow Hynix to sell up to 10 percent of new shares as a part of the auction to raise the odds of success.

"There are no bidders who have submitted their interest yet and we are quite concerned about the auction," said a source who has direct knowledge of the deal.

Korea Exchange on Wednesday asked five business groups to clarify rumours on their potential interest in Hynix. LG Corp., Hyosung Corp and Dongbu CNI denied the speculation, while SK and STX flagged their potential interest.

Shares in Hynix closed down 5.4 percent after falling as much as 7.9 percent on Wednesday, while Hyundai Heavy shares finished up 6.4 percent after gaining nearly 9 percent earlier.

Hyundai Heavy shares have fallen around 11 percent over the past month since it first expressed its interest in Hynix, lagging a 2 percent gain in the wider market.

Nine Hynix shareholders including KEB, Shinhan Bank and Woori Bank are offering 88.5 million shares of Hynix worth around 2.5 trillion won ($2.3 billion) at the current market value.

Copyright Reuters, 2011