Two heavyweight firms up for grabs on local M&A market

The company boasts a healthy financial report card, and has long-term expertise in logistics as one of the nation’s first logistics firms ― it was established in 1930.

No one for Hynix

Hynix, due to its heavy dependence on research and technology, is considered a business that is not as lucrative as expected because of the capital it is forced to spend on developing and maintaining technological prowess.

“This is why it has been so difficult to sell off the stakes despite the potential and strength that Hynix is obviously in possession of,” Kim said.

Once seen as doomed, the company rebuilt itself over the last 10 years. Last year, its consolidated sales rose to a record 12.09 trillion won ($10.87 billion), up by 53 percent from 2009 despite the price fall of two major memory chips ― DRAM and NAND Flash memory, its main products.

But nothing is for free, especially for a tech firm like Hynix, which needs steady investment and brains behind the money in order to show sustained growth.

“It’s like a grand house that everyone admires but nobody wants to buy because they are not up to the maintenance,” said one industry watcher who declined to be identified, citing the sensitivity of the upcoming sale.

But he added that things could change if the Hynix shareholders ― the creditors holding the 15 percent stake to be put up for sale ― decide to add some incentives, such as bigger say in management.

Korea Exchange Bank, the largest creditor-turned-shareholder, is keeping mum on what more can be done.

“We are going through a due diligence with an accounting firm and there are legal matters to tend to. We just hope the deal will be a good one,“ said one bank spokesman.

He added that Hynix’s recent victory in a patent infringement appeal against Rambus Inc., a U.S.-based technology licensing firm, could be a favorable factor in the due diligence.

Previously, textile maker Hyosung Group was set to purchase Hynix, but backed out.

LG Electronics, due to its IT expertise and experience in semiconductors, has been most cited as the best match for Hynix, but the company has too much on its own plate, industry watchers note, trying to keep up with its global and local rivals in the smart device race.

More eyes on Korea Express

Korea Express seems to be a different story.

As of this month, a myriad of industrial heavyweights such as POSCO, CJ Group and Lotte Group are said to be among the roster of potential buyers, and a preferred bidder is expected to be selected as early as July.

Korea Express not only is robust financially ― it reported sales of 2.97 trillion won and an operating profit of 98.6 billion won in 2010 ― but also has a wide business portfolio, with a specialty in logistics.

Its long history and exposure, not to mention customer loyalty, makes it one of the most attractive assets on the market, experts said.

“There is a lot to be gained in terms of synergy and overseas reach, which is why these big firms are so eager to bid,” said one industry watcher on condition of anonymity.

Typically, when local companies seek overseas entry, they usually face the challenge of a lack of logistical infrastructure in the markets they are targeting.

Owning a logistical company with a ready-made network would therefore make entry much easier.

For companies such as Lotte, which knows it needs to build up its logistics business to level with its strong presence in retail and distribution, Korea Express makes perfect sense, experts said.

Reports that Kumho Terminal will be sold separately from Korea Express do detract from the appeal, but any company interested in establishing itself in the area of logistics will still see reason to bid.

By Kim Ji-hyun (jemmie@heraldcorp.com)

The fate of Hynix Semiconductor and Korea Express ― two of the heavyweights up for grabs on the local M&A front ― appear to be at crossroads due to lopsided demand.

Second largest supplier of computer memory chips Hynix, now completely back on its feet financially, was expected to put 15 percent of its stake on the selling block by the end of this month.

The deal, however, looks like it will be drawn out longer as a sales ad is unlikely to be issued until at least this coming June.

The company is currently undergoing a pre-sale due diligence, which is the official reason, but Hynix creditors are reportedly arguing over the right date, mostly because no one has stepped up to express interest in snapping up the shares, which could be worth at least 3 trillion won ($2.7 billion).

LG, cited as the best match in the markets, has repeatedly denied having any interest in the sale.

“How many times do we have to say we are not interested in Hynix,” Koo Bon-moo, LG Group Chairman said last year. “If we had that kind of money, we would buy something better.”

Analysts also agree it won’t be easy to find a buyer.

“It’s not an easy situation because a chipmaker has a lot of risks involved, so any buyer that’s interested in Hynix needs to have both the dough and the expertise,” said Kang Jung-won, an analyst at Daishin Securities.

Korea Express, on the other hand, seems to be a more attractive package, industry watchers say.