Hynix names Chey as co-CEO as SK completes $3 billion deal
SEOUL (Reuters) - South Korean chipmaker Hynix Semiconductor Inc (000660.KS) named SK Group chairman Chey Tae-won as its co-chief executive after the group's flagship company SK Telecom Co (017670.KS) become its top shareholder following a $3 billion deal.
The appointment, announced on Tuesday, came after some shareholders opposed Hynix's plan to nominate Chey to the board, citing concerns that he would not be able to manage Hynix properly due to an ongoing court case over embezzlement charges against him, which he denies.
In January, Chey was charged with embezzlement after prosecutors found he and his brother used more than 200 billion won ($178 million) of corporate funds for personal investments.
This was the second corruption charge against Chey in as many years.
The appointment of Chey to the Hynix board has raised criticism from media that chaebols, or family-run South Korean business groups, continue to ignore demand from minority shareholders to improve their corporate governance structure.
Lack of transparency and poor corporate governance is key in the "Korea discount" the amount by which investors discount Korean stocks relative to their peers.
SK Telecom said on Tuesday it had completed a 3.34 trillion won ($2.98 billion) deal to buy a 21.05 percent stake in Hynix, which had been under a creditor-led restructuring program since the early 2000s.
Hynix was on the receiving end of an unsolicited bid from U.S. rival Micron Technology Inc (MU.O) and saw a number of failed sales attempts and a spin-off from its former parent Hyundai Group.
With the $3 billion deal, Hynix now expects it will be able to more aggressively invest to catch up sector leader Samsung Electronics Co (005930.KS).
Hynix raised its 2012 investment plan by 20 percent to 4.2 trillion won, as rivals from Japan's Elpida Memory Inc 6665.T and Taiwan's Nanya Technology (2408.TW) struggle with big losses and financial problems, hit by tumbling chip prices to near production costs.
Fitch ratings agency on Tuesday upgraded its ratings on Hynix, citing expectations for improvement in its competitiveness on the back of SK's support. The agency, however, cut SK Telecom ratings to reflect weaker financial profile and higher business risks involving chip manufacturing.
Hynix shares closed up 2.6 percent, beating a 0.2 percent drop in the wider market .KS11.
($1 = 1121.9000 Korean won)
(Reporting by Miyoung Kim; Editing by Jacqueline Wong and David Chance)