SK Telecom picked for $3 bln Hynix deal

SEOUL (Reuters) - SK Telecom (017670.KS) has been named preferred bidder for control of Hynix Semiconductor (000660.KS), a major Hynix shareholder said on Friday, ending years of struggle to find a new owner for the world's No.2 computer memory chipmaker.

The $3 billion deal, which will be the biggest acquisition ever by SK Telecom, will help the firm add a new revenue source. South Korea's top mobile carrier has struggled with slowing profit growth as luring customers in a maturing domestic telecoms market has raised costs.

For Hynix, having a company with a stable cash flow as a top shareholder will help the loss-making chipmaker close the gap with bigger rivals Samsung Electronics Co (005930.KS) and Toshiba Corp (6502.T), analysts said.

"Despite share dilution, this potential capital increase will significantly lower market concerns of financial/liquidity problems," Citi analyst Henry Kim said of Hynix.

Kim estimated that Hynix's net debt would halve to around 2.4 trillion won ($2.1 billion) after the share sale.

Optimism on the deal finally going through after years of aborted sales attempts pushed Hynix shares up more than 5 percent on Friday.

Shares in SK Telecom closed up 3.1 percent versus the broader market's .KS11 2.8 percent rise. Hynix finished up 0.2 percent.

"The offered price is reasonable and a win-win for SK Telecom and creditors," said Koo Ja-woo, an analyst at Kyobo Securities.

SK Telecom bid between 3.3 trillion-3.5 trillion won for about 21 percent stake in Hynix, according to the source with direct knowledge of the deal.

The source said SK Telecom had proposed a price of 22,000-24,000 won per share for 101.85 million new shares to be offered by Hynix, and 23,000-25,000 won per share for 44.25 million shares held by nine shareholders.

The offer represents a premium of up to 16 percent on Thursday's closing price.

Lead shareholder Korea Exchange Bank (KEB) (004940.KS) said on Friday that Hynix's major shareholders agreed to pick the sole bidder as a preferred investor, confirming earlier Reuters story.

Ratings agency Moody's said after the announcement that it would put SK Telecom under review for a possible downgrade, as the investment is likely to be, at least in part, "debt funded."

Moody's said the inherent volatility in the semiconductor business will bring a degree of volatility to the mobile operator's credit profile.

SK Telecom, the sole bidder in the auction that closed on Thursday, submitted the final proposal, defying doubts that it may withdraw following a prosecutor raid on parent SK Group over allegations that its founding family members may have used funds from SK affiliates to fund their personal investments.

FINE TUNING

Hynix will have a board meeting on Monday to decide the pricing of new shares it will sell to SK Telecom, KEB said.

SK Telecom can cut the number of new shares it will buy should the chipmaker decide to sell them at a higher price than its offer.

KEB leads the nine shareholders including state-run Korea Finance Corp, Shinhan Bank (055550.KS) and Woori Bank (053000.KS).

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

Attempts to give management control 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.

Shareholders want to complete the deal as late as the first quarter of next year.

The latest auction comes after at least two aborted sales attempts and several deadline extensions.

($1 = 1134.250 Korean won)

(Additional reporting by Hyunjoo Jin; Editing by Jacqueline Wong and Miyoung Kim)