| Consolidation time
Seoul, Nov. 26 (Reuters): South Korea’s Hynix Semiconductor is set to sign a preliminary deal to sell non-core assets it has valued at around $600 million to a fund at Citigroup within a month, a source close to the talks said on Wednesday.
Hynix, the world’s third-largest maker of memory chips, has been in talks with the fund and two other investors over the sale of its system integrated circuit (IC) operations, which generate one fifth of its annual revenues, in order to raise cash for investment in its bread-and-butter memory chips.
The IC operations are divided into a contract chip making unit and a second division that makes chips for displays and optical image sensors for digital cameras and camera phones.
“The two (Citigroup and Hynix) are making big progress in the negotiations to sign a legally binding memorandum of understanding by the end of this year,” a source close to the talks told Reuters.
“The agreement is likely to be made in December...and if the deal is signed, it would give Citi an exclusive right for negotiations and may also include details such as negotiation schedules, pricing ranges and valuation methods,” the source said.
The contract chip making unit competes with Taiwan Semiconductor Manufacturing Co Ltd and United Micro Electronics Corp while the other unit goes up against local rival Samsung Electronics Co Ltd and Japan’s Seiko-Epson Corp.
The source said the Citigroup fund wanted to sell the Hynix unit to a third party at a profit, but declined to comment on whether the two other potential buyers were investment funds or chip manufacturers.
Hynix shares jumped 9.3 per cent to 6,710 won as investors bet the asset sale would help boost its capital investment. The benchmark Korea Composite Stock Price Index was up 1.9 per cent at 782.72.
Hynix recently recorded its first profit in six quarters, helped by rising demand for chips used in computers and game machines ahead of the Christmas holiday season.
But the cash-strapped chip maker needs asset sales to finance technology upgrades to remain competitive as it has lagged its rivals in investment terms since 2001.