Hynix Semiconductor Inc's board of directors rejected a US$3 billion sale to Micron Technology Inc, saying the South Korean chipmaker can survive without an investment by the US company.
An accord with Micron announced last week and approved by Hynix creditors yesterday, "is now null and void," said Park Chan-jong, Hynix's chief spokesman. "Any further talks with Micron are unlikely."
Micron was seeking control of the supply of dynamic random-access chips, the main memory in personal computers, after five consecutive quarters of losses tied to volatile prices. Hynix creditors, who aimed to recoup part of the US$5 billion they loaned to the company, said they don't plan to extend new loans.
Hynix Chief Executive Officer Park Chong-sup offered his resignation after the board's unanimous decision, which ended five months of talks to form the world's biggest computer memory chipmaker. The sale would have marked the largest foreign investment in a South Korean company.
While rebounding chip prices may bolster the company, some investors said its survival is anything but assured. "There's no way Hynix can survive on its internal cash flow," said Ben Akrigg, who helps manage US$3 billion in Asian stocks at Morley Fund Management.
Under the proposal, Micron planned to pay 108.6 million shares, now worth US$2.87 billion, for Hynix's main memory chip business and US$200 million for a 15 percent stake in its other business. The boards of the two companies had final say over the decision, according to the memorandum of understanding.
The South Korean government had been eager to complete the sale, which would have dovetailed with an agreement by General Motors Corp to buy Daewoo Motor Co. That accord included its own last-minute drama: protesting Daewoo workers stormed the venue of a signing ceremony, forcing its cancellation.
The nation's top financial regulator, Lee Keun-Young, said Hynix's survival would be left up to the market, a spokesman for the Financial Supervisory Commission said.
Creditors such as Korea Exchange Bank and Chohung Bank plunged as much as 8 percent on the news. Hynix jumped by its 15 percent daily limit.
"This is indeed disconcerting news," said Lee Jong-Hwi, chief credit officer at Hanvit Bank, one of Hynix's main creditors. "Hanvit has not considered any plan for the company's independent survival."
The lenders don't intend to extend further loans to Hynix, though they 1aren't likely to place it under court receivership, said Chung Hyung-ryang, a senior credit official Korea Exchange Bank.
"There will be no new loans to Hynix," he said. "Creditors will have to discuss ways for Hynix's independent survival. This could include writing off some of the company's debts."
The Hynix board blamed creditors for striking a flawed agreement and said rising chip prices will let the company survive on its own. "The creditors had valued Micron's share price higher than its recent value and were unrealistic in their estimate of the company's hidden debt," the statement said.
The two sides initially valued Micron's shares at US$3.8 billion, Korean newspaper reports said, based on a price of US$35.
The stock closed yesterday at US$26.45, down by about a tenth since the accord was announced.
Hynix's minority shareholders opposed the sale, saying it would leave them with little but the rump of a company stripped of a business that provided 75 percent of sales. Hynix workers also mounted a drive to reject the plan, fearing the loss of their jobs.
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