FOCUS-Korea LG concedes to
Hyundai-led chip merger
09:37 a.m. Jan 06, 1999 Eastern
By Koo Hee-jin
SEOUL, Jan 6 (Reuters) - South Korea's LG Group
said on Wednesday it had agreed to a merger of its
chip unit LG Semicon Co with that of Hyundai
Electronics Industries Co, ending a four-month
wrangle over the future control of the merged firm.
But LG said it would not take any stake in the new
company, despite expectations that ownership would
be divided between LG and Hyundai Group.
LG said in a statement it would ''hand over 100
percent of the stake in LG Semicon'' owned by the
LG Group's other affiliates.
An LG official said this meant the group would not
take any stake in the merged company. He did not
elaborate.
Hyundai Electronics's President and Chief Executive
Officer Kim Young-hwan told Reuters his firm had
not fixed any purchase price for LG Semicon's
shares, but said it would be related to the price of the
firm's shares in the market.
The Hyundai executive said the first step would be to
evaluate LG Semicon, which would be done by an
investment bank, and not Arthur D. Little, which had
done an appraisal of the two Korean chipmakers for
the merger late last year.
''It's not going to be a simple task. It's going to take
months,'' Kim said.
The merger of Hyundai Electronics and LG Semicon,
both among the world's top 10 dynamic random
access memory (DRAM) makers, would create the
world's second-largest DRAM supplier.
Kim said his company may ask LG for a
debt-to-equity swap but that it was ''too early to tell
what will happen.''
Hyundai Electronics's debt-to equity ratio stood at
935 percent as of end-June 1998, and claimed they
had been able to slash it to 387 percent by end-1998
through restructuring.
LG Semicon's debt-to-equity ratio stood at 617
percent at end-June 1998.
The firm's president Koo Bon-joon told Reuters it
had been reduced to around the 200 percent level at
end-1998, as it separated its liquid crystal display
business to form a new company by incorporating
similar businesses owned by affiliate LG Electronics
Inc.
Hyundai Electronics's Kim said the merger would
create the world's largest memory chip producer in
terms of capacity with 300,0000 eight-inch wafer
chips of month versus Samsung Electronics Co's
180,000.
But he added that capacity does not translate into
production or profitability.
''Samsung is not No.1 because they have the biggest
capacity but because they have the best technology.''
Kim also said he believed the merger would benefit
the global chip sector.
''This is good for the stabilisation of the world
semiconductor market. It is one less unsettled factor.''
he said.
The ''unsettled factor'' had prompted Moody's
Investors Service to announce it may cut debt ratings
for Hyundai's U.S. chip-making unit.
Analysts agreed that ther merger would benefit
Korea's overall economy as well as the chip sector.
''LG's decision will clear much of the uncertainty felt
by foreign investors surrounding the corporate
restructuring in Korea,'' said an analyst at a U.K.
securities company.
''I believe the merger will also prove beneficial for the
semiconductor sector for the long run, but the results
will show two to three years from now,'' he said.
Copyright 1999 Reuters Limited. |
