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Hynix Semiconductor to Decide on SK Telecom Deal

Top shareholders of Hynix Semiconductor Inc. will decide on Friday whether to pick sole bidder SK Telecom as the preferred investor, a lead shareholder said on Thursday, raising hopes that the long-delayed sale may finally succeed, Reuters wrote Thursday.

(Reuters) – Top shareholders of Hynix Semiconductor Inc. will decide on Friday whether to pick sole bidder SK Telecom as the preferred investor, a lead shareholder said on Thursday, raising hopes that the long-delayed sale may finally succeed.

Growing prospects that the deal may finally go through after years of aborted sales attempts helped Hynix shares pare earlier losses on Thursday.

Having South Korea’s top mobile carrier with ample cash as a top shareholder will help the loss-making chipmaker close the gap with bigger rivals such as Samsung Electronics and Toshiba Corp , analysts said.

“SK Telecom, as the biggest shareholder, would offer Hynix a windbreaker in terms of cash flows. Hynix would be able to invest more in facilities without having to worry about cash-flow constraints,” said Song Myung-sup, an analyst at HI Investment & Securities.

“One risk, however, is whether SK would manage the company well. Hynix management has done the best it could so far…and that could change with SK’s entrance.”

Korea Exchange Bank , a lead shareholder of Hynix, said it will announce Friday morning whether to pick SK Telecom as the preferred bidder.

Creditors-turned-shareholders of Hynix have sought to recoup billions of dollar they injected into the debt-ridden chipmaker several years ago following the Asian financial crisis.

Attempts to give management control of the world’s No.2 computer memory chipmaker to a domestic company for fear of a potential leak of advanced technologies has cooled interest in Hynix at a time when investors are avoiding the capital intensive and cyclical memory chip sector.

The latest auction comes after at least two previous failed auctions and several deadline extensions.

Shares of Hynix pared earlier losses of more than 6 percent and ended down 2.5 percent on expectations of SK Telecom bidding, beating a 5 percent fall in the wider market .

SK Telecom, however, slumped 5.2 percent, partly hit by concerns that a potential Hynix deal would expose the telecoms operator to the highly cyclical and capital intensive industry.

“Looking at a three to four-year time frame, the Hynix buyout would be a burden on SK Telecom as it would have to make enormous investments without immediate benefits,” said Lee Ji-yeon, an analyst at KB Investment & Securities.

SK GROUP INVESTIGATION

Uncertainty over the deal increased this week after prosecutors raided the offices of SK Telecom’s parent group over allegations that the group’s chairman, Chey Tae-won, may have used funds from group companies for personal investments. SK Group denied the allegations.

An ongoing investigation into the chief of SK Telecom’s parent group triggered speculation that SK Telecom may opt not to submit a final bid, sending Hynix shares down 9 percent over the past two days.

SK Telecom became the sole bidder left in the race after shipping-to-shipbuilding group STX Corp pulled out in September.

Hynix shareholders extended the final deadline, hoping new bidders would emerge.

A total of 146.1 million shares, worth around 3.2 trillion Korean won ($2.9 billion) at current market value, are up for sale.

Nine Hynix shareholders, including state-run Korea Finance Corp, Korea Exchange Bank, Shinhan Bank and Woori Bank are offering a combined 44.25 million shares. Hynix is selling 101.85 million new shares.

Shares of Hynix have dropped around 34 percent over the past six months, lagging an 11 percent drop in the wider market , partly hit by weak prospects for computer sales growth and its first quarterly loss in two years.

($1 = 1,117.400 Korean won) (By Hyunjoo Jin and Ju-min Park; Additional reporting by Cho Mee-young, Jungyoun Park and Seong-bin Kang; Editing by Miyoung Kim and Matt Driskill)