Six months and intense negotiations that was to create the world's largest
memory chipmaker were thrown out the window as Hynix' board of directors
rejected management's proposal to sell the company's memory chip operations to
Micron Technology for $3.2 billion. The board of the Korean chipmaker said Hynix
would be better off staying independent.
The impact of the surprise collapse of the Micron-Hynix merger will likely
cause memory chip prices to fall worldwide on fears Hynix will produce the chips
with little concern for flooding the market. "We have reached the
conclusion that there are too many problems with the creditors' post-merger
restructuring plan for the remaining company," the board said in a press
statement.
The decision may also have been influenced by the company's union which had
announced last week that 7,000 Hynix workers were willing to resign if the core
of the firm was sold to Micron.
Hynix CEO Park Song-chup immediately tendered his resignation. Since it was
Song who had been pushing the merger, analysts said the chance the two parties
can work out a new deal would be highly unlikely. They are also surprised that
the CEO of the company was apparently operating without the backing of the
board.
Industry experts said they were stunned by the Hynix decision because few
believe Hynix has the ability to survive on its own for much longer. "I
frankly don't know what the Hynix board was thinking. Hynix is not a viable
company. What happens now is they will most likely die a lingering, slow
death," said semiconductor market analysts Joe Osha at Merrill Lynch.
Korean banks are unlikely to pump any more money into Hynix, which is already
$6.7 billion in debt. Hynix lost $3.9 billion last year. The banks desperately
wanted to get out of their relationship with Hynix and will likely reject any
requests for new funds.
Micron officials said the collapse of the merger is the result of Hynix
refusing to adopt the reforms proposed by creditors. The company did say it may
continue efforts to reach a new agreement "Right now Micron is in a
position of evaluating the situation to determine an appropriate course of
action," Micron spokesman Sean Mahoney told Reuters from Boise, Idaho. The
rejection is also blow to Korea's government, which is facing a fall election.
Officials wanted the deal with Micron to get the Hynix problem, which represents
so much of what is wrong with Korea's economic system, off the newspaper front
pages