The Hyundai Group confirmed the expected news on Friday of its agreement to acquire the LG Group’s LG Semicon Co DRAM memory business for $2.1bn. It plans to complete the agreement on June 30, with the combined unit up and running by October 1. During a press conference in Seoul, Hyundai president Y H Kim said that existing wafer fab plants would continue operations separately until design and production processes can be unified, probably in about a year. The chip unit will be separated from Hyundai’s telecommunications and electronics businesses.
LG owns around 60% of LG Semicon, and will hand over its 91.2 million shares to Hyundai. Payment will be made by installments, with the first payment due by June 30, and the last by December 2002. As expected, the price includes Hyundai selling its 5.25% stake in Dacom Corp, South Korea’s second largest wireless telecoms operator, to the LG Group. Although LG has only a 4.7% direct stake in Dacam, it is believed to control more that 30% of the company through subsidiaries and affiliates. The next largest shareholder is Samsung Electric Co, which has a 15.94% stake. LG is expected to refocus on the telecoms sector, once it has freed itself from government restrictions limiting its operations in the sector. LG Electronics will continue in the digital television and display markets.
Hyundai takes on LG’s debt, bringing the total figure up to $8 billion. Hyundai says it is looking for foreign investors for the chip business, plans a $1 billion stock offering, and is talking to South Korean banks in order to help restructure the debt. That might prove a controversial move in the US, where Micron Technology Inc has been arguing that the International Monetary Fund supported banks should not be allowed to prop up the Korean semiconductor market.
Kim said the merger would take the unit’s combined share of the DRAM market above that of Samsung. Both have approximately 20% of the worldwide market, according to market research firms. Micron, which acquired Texas Instruments Inc’s memory business last year, has a 14% share. Production capacity will be above 300,000 eight-inch wafer starts per month. There was no word of what would happen to Hyundai’s chip plant in Scotland and LG’s plant in Wales.
Overall, the $74bn Hyundai group will split up into five companies: electronics, cars, heavy industry, construction and finance/services. Its affiliates will be reduced to 26 from the current 79 by year-end, through mergers, sales, spin-offs and closures, the Korea Herald reported Saturday.
