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To: DJBEINO who wrote (4401)	12/24/1998 10:16:00 AM
From: DJBEINO	Respond to of 9582

Hyundai Takes 70 Pct Stake in Newly-Merged Chip Firm 12/24, 18:19 After months of haggling under the international spotlight, the verdict is in. Hyundai Electronics Industries has been given the controlling 70-percent stake in a new company to be formed as a merger with LG Semicon. In its final recommendation yesterday, international consultants Arthur D. Little said the competitiveness of the new semiconductor giant would be enhanced if HEI was to have control over management. However, LG immediately waged protest, saying that it cannot accept the recommendation since it was made without properly reviewing its materials for evaluation, thus creating another dark shadow on what the future holds. In a statement, LG said, ''LG is in agreement that a merger may be necessary for boosting the competitiveness of the two companies but we have failed to reach agreement on the criteria for evaluation.'' While the protest has been anticipated, LG is not in a place to simply reject the recommendation since it is generally seen as a direct violation of promises that it has made up until now. Commerce, Industry and Energy Minister Park Tae-young, upon hearing the news, said HEI and LG will have to accept the recommendation. If not, creditors will retrieve and stop all new loans to the company which refuses to comply. Despite the protest, ADL's ruling provides the necessary opportunity for the two companies to proceed to establish the new company by combining and reorganizing their assets and debts over the next few months. ''If all goes well, the new company should be in place by around April. And it is in the best interest of the new company that the process is expedited,'' said ADL managing director Chung Taesoo. Before the recommendation was made public yesterday afternoon, there has been all sorts of speculations, one of which was that ADL may refrain from making a clear-cut choice between the two companies. ADL, however, concluded its month-long evaluations in favor of HEI based on the competitiveness for the future, technological advantage, productivity and management and marketing expertise. The merger will immediately create the world's second largest producer of dynamic random access memory chips after Samsung Electronics and the one, at least by this year's estimates, with the largest production capacity. The merger between the two companies was pursued as part of the overall restructuring of the top five conglomerates but there has been trouble right from the start and there were questions as to whether or not it will work. For one thing, LG has been holding out from cooperating fully with ADL during the evaluation process and the government has applied heavy pressure over the past week for the two companies to keep to their commitments. The selection of HEI as the majority owner of the new company has more implications than just the benefits that it will bring to Hyundai. For one thing, it is certain to improve investor confidence. ''Foreign investors have been watching the HEI-LG deal closely since it is the positive sign,'' said one official of the Federation of Korean Industries.

To: DJBEINO who wrote (4401)	12/24/1998 10:19:00 AM
From: DJBEINO	Read Replies (1) \| Respond to of 9582

Chip Unit Merger Gives Positive Signals 12/24, 18:23 There have been numerous questions surrounding the merger of the semiconductor divisions of Hyundai Electronics Industries and LG Semicon, but most of them have not been put to rest as HEI yesterday emerged victorious. Among the questions was whether or not the merger made sense, particularly when considering the unique nature of the dynamic random access memory market, but it appears that the new company will have to just move forward. There are still concerns. Many question whether or not the new company will be able to balance their corporate cultures and focus on their synergy effects to maintain and enhance their international competitiveness. If anything, it is certain to send out positive signals to foreign businesses and investors that have been wary of Korea's commitment to its restructuring and reform programs since it appears that all the talk is for real. Even though LG is protesting against the ruling, there is really no way that it can operate its multi-trillion-won business without financial support from domestic banks and it remains to be seen how long it can hold out. For one thing, LG's statement following the release of the ADL recommendation was toned down from its earlier position which reportedly indicated that it will accept any action taken by the government and creditors. To be sure, there are other problems to be solved. The merger will create a colossal a company with some 18 trillion won in assets and debts to match. The merger will certainly result in major layoffs. However, HEI officials insisted, there are greater synergy effects. ''Over the next five years, the merger will make it possible to realize savings of $2.5 billion in investments for 12-inch wafer processing facilities. ''We are estimating we would be able to spend $2 billion less in investments for research and development and $1 billion less in administrative and marketing costs,'' said HEI president and CEO Kim Yong-hwan. In addition, he said in a recent meeting with reporters, the two companies will be able to advance the development of new products by six to 12 months and make it possible to increase the production of high value-added chips. With their combined market share of 17.7 percent in 1997, it is next only to Samsung Electronics with its 18.8 percent. But, in terms of the production capacity, the new company will be the largest with nearly 240,000 8-inch wafers per month, much larger than Samsung's 163,000. On the other hand, the merged company will have to take into consideration the fact that computer makers do no make a habit of making large purchases from a single company, meaning that it may not be able to maintain its market share. It will also have to handle double the pressure on what it will do with new manufacturing facilities in Wales and Scotland which have been on hold since the outbreak of the financial crisis of the end of last year. Fortunately, market prospects are in its favor. International forecasts indicate that demand for DRAM chips will begin to increase from next year and prices have been picking up. ''In the past, reduction in production for controlling prices were suspected as collusion, but with the merger HEI and LG have a freer hand at controlling their production volume,'' one industry official said. Pros and cons aside, the most important aspect of the deal, if it does go through, and it probably will, he projected, will have a major impact on international confidence in the Korean economy. ''This is probably one of the most significant developments in corporate restructuring this year. With the government and creditors playing their roles, chances are that LG will have to accept the verdict,'' he added.