KT: Micron-Hynix Deal Enters Crucial Phase
By Nho Joon-hun
Staff Reporter
Micron Technology should have known a thing or two when they got into negotiations with Hynix Semiconductor: Everyone, from the media to the government, would have something to say about it.
It should have known that in the Korean corporate world nothing is what it seems.
But it decided to go ahead on the assumption that Hynix is an interested party and that it is committed to putting together an agreement as quickly as possible.
Well, it has been nearly three months since negotiations began and the latest development is that Hynix on Saturday sent back a revised proposal for a memorandum of understanding.
So, what has actually happened over the past three months? The prices for dynamic random access memory (DRAM) chips have risen unexpectedly and the person in charge of Hynix's Restructuring Commission is the Commerce, Industry and Energy Minister, the government agency responsible for industrial restructuring.
There is more. Within both camps there are parties who feel that the deal may not be as attractive as first thought and that they may be better off ending it before it drags on any further.
This is the reality of doing business in Korea. Unlike most other countries, few things are kept secret here. When the media does get wind of new information be it speculative or not, they play it out on the front pages and in the evening news.
If the media is to be believed then Hynix has drastically changed the contents of the Micron proposal, including the rejection of setting up an escrow from which the American chipmaker will have the right to draw its hidden debts or losses are later discovered.
Hynix creditors did decide to provide $1.1 trillion won in new financing with Micron's guarantee of payment at market interest rates. The proposal for picking up $400 million in 30-year bonds with a yield of 2 percent was rejected.
Where the payment for taking over Hynix's memory lines is concerned, the creditors opted not to dispute the headline price of $4 billion. Instead they would rather address the reference dates for transferring Micron's shares, thus leaving room to take in an additional $300 million if things go Hynix's way and Micron's shares would gain in value.
For those who drafted the revision, including Hynix CEO Park Chong-sup, there is hope that Micron will agree to the changes and seek further negotiations to conclude the deal. Park is reportedly planning a trip to the U.S. this week for the final negotiations.
``In reality, the MOU itself will only serve as a guideline for more detailed negotiations. In other words, it will merely confirm the commitment of the two companies to form a strategic alliance,'' said one industry analyst who has been close to the talks.
What this indicates _ since Micron and Hynix have not signed the MOU _ is that there is every chance that the deal will fall through, especially if Micron rejects the major segments of the revision.
``With more and more insiders calling for the exploration of other options, such as keeping Hynix intact and capitalizing on rising DRAM prices, creditors are finding it hard to make a decision although their basic course of action is to proceed with the negotiations,'' the analyst said.
Add to this the recent suggestions by Commerce-Industry-Energy Minister Shin Kook-hwan that there is plenty to gain from a strategic alliance between Hynix and Micron and the indecision makes the negotiations more difficult especially since Hynix had on an number of occasions approached Samsung.
As if all this is not confusing enough, there are such vital issues as the writing off of Hynix's debt, estimated at 6.7 trillion won, which has yet to be discussed in detail. Micron has said it will not take over any of it.
This aspect of the Hynix issue is important because if the creditors write off a considerable portion of the debt, why should they extend the benefit to Micron when South Korea is home to the largest, and most competitive, DRAM producer in the world.
Samsung, for its part, has denied any interest in Hynix but its position might change if a majority of Hynix's debt could be written off since taking over Hynix's memory business could turn it into a behemoth which would be way ahead of the competition for years to come.
``The DRAM market has recovered dramatically over the past three negotiations. Nothing has been decided and there is no indication that months but this is about the only change in the Hynix-Micron progress will be made any time soon,'' the analyst said.
jakenho@koreatimes.co.kr
2002/02/24 17:18
(from DRAM Exchange) |
