Hynix responds to $5B Micron bid


Hynix has set chip stocks worldwide moving, with consolidation that analysts say is inevitable

By Alex Frew McMillan
CNN Hong Kong

(CNN) -- Korea's Hynix Semiconductor said it could not confirm, or deny, that Micron Technology will pay between $4 billion and $5 billion for its DRAM chip operations.

"I can't confirm that story," a spokeswoman for the company told CNN. "We haven't heard of anything official to that effect from our restructuring committee."

The comments came after a local newspaper reported on Friday that American-based Micron will pay up to $5 billion for Hynix's DRAM business.

DRAM stands for 'dynamic random access memory.' Hynix is the world's third-largest maker of those chips, with Micron ranked No. 2 and Korean counterpart Samsung Electronics at No. 1.

But a Micron-Hynix tieup would outdo Samsung as far as capacity goes.

Stock up again in Seoul trade

Hynix stock has been flying so far in 2002, sparking a rally in chip stocks worldwide, after it raised prices and said an end to tieup talks with Micron is imminent.

It is up 2.46 percent at 2,920 won on Friday morning, on a day the main Korean stock index, the Kospi, is up 1.7 percent.

Hynix executives have said they expect talks to conclude by the end of January.

The company has also boosted chip stocks around the globe by raising prices three times in a month, most recently on Wednesday, citing strong computer demand in China.

The Korea Daily News said Friday that Micron would take over Hynix's DRAM operations. The two companies have been in talks since early December.

Investors sold off Hynix stock toward the end of the month, after Micron bought a U.S. DRAM factory from Toshiba.

Micron executives then suggested that they no longer needed a merger with Hynix. But the Korean company has repeatedly stated that talks are still moving ahead.

Hynix has around 8.6 trillion won ($6.6 billion) in debt. But that will be cut to around 6 trillion won through debt writeoffs.

Matching debt level

The sum mooted in the Korean newspaper would therefore match the remaining debt level.

A Hynix official told Reuters on Friday that creditors are looking for a deal that covers their debt exposure.

"I think creditors want that amount, which is just equivalent to their six trillion won ($4.6 billion) in exposure to us," the unnamed official told the news agency.

The DRAM operations account for 64 percent of Hynix's total sales.

Further consolidation in the memory chip business is necessary, according to analysts. Chip prices collapsed more than 90 percent in 2001, due to a glut on the market and a lack of demand.

But investors have in 2002 been betting that the industry has bottomed out.

South Korea's government gave those hopes fresh hope on Friday. The Ministry of Commerce forecasting that the country's chip exports will rise 18.9 percent in 2002, to $17 billion.

Production will rise 14.9 percent to $19.3 billion, the ministry stated.

Chips are a key export for South Korea, which was one of Asia's strongest-performing stock markets and economies last year.