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COULD LG BE THE ONE....
LG to exit semi biz, will sell chip ops. to Hyundai
By Jack Robertson
Electronic Buyers' News
(01/07/99, 09:55:26 AM EDT)
In a sudden about-face, LG Semicon today said it would sell its total chip operations to Hyundai Electronics Industries Co. and the parent LG Group would exit the semiconductor business.
Final terms for the Hyundai acquisition must still be negotiated. Adding LG Semicon sales could put Hyundai into the ranks of the top 10 global semiconductor firms with more than $4 billion in annual chip revenue.
No sooner had LG made the announcement than the two groups were fighting again - this time over the price for LG Semicon. An LG Semicon spokesman in Seoul said the company wants to be paid the current value for its stock - more than $500 million - as well as a premium for a large part of the $6.2 billion expected savings to result from merging the two chip operations.
The parent LG Group and other LG affiliates own 60% of the stock of LG Semicon, with remaining shares held by the public. At the current LG Semicon stock price, the acquisition of all shares would total more than $900 million.
A Hyundai Electronics spokesman said acquiring 100% of LG Semicon will make the new merged chip operation far easier to manage than the former plan to share control between the two companies. Even so, melding the two disparate operations and divergent business strategies will pose major challenges, he conceded.
From the beginning it appears the merger might have trouble trying to get all the savings originally projected in consolidating chip operations. For starters, the two companies pledged to avoid any large layoff of workers. LG said all the management of its chip subsidiary would also be transferred to Hyundai. It wasn't clear how Hyundai would absorb the executives of its former arch-rival.
It was also uncertain if any 8-inch wafer fabs would be closed. If both LG and Hyundai leading edge fabs continued to run at present rates, the combined output of 64-megabit DRAMs would be 30 million chips a month. This far exceeds Micron Technology Inc.'s current 18-million-to-20 million 64-Meg output a month and Samsung Electronic Co.'s 17-million-to-18 million monthly output.
The LG spokesman said the acquisition also includes LG Semicon's total debt, which analysts estimated now exceeds $4 billion. Added to its own current debt, Hyundai Electronics total borrowings would top $10 billion. Analysts have long claimed this was an excessive burden that would hamper any future chip operations.
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