Hynix-Micron merger negotiations complicate further

Who will win the Olympic finals of merger-making? Korea's Hynix or USA's

Micron? To be sure, both parties are skating a nearly flawless program, complete

with multiple triple axles, backward flips and saltos. The two parties have

deployed every imaginable tactic to get the other side to sign on the dotted

line of a contract favoring their side.

In the process, the Hynix-Micron merger negotiations have become incredibly

complex even by the standards in Korea where negotiating business contracts is

considered a highly specialized for of art to the point where most high-level

Korean businessman started their career in negotiating major contracts with

customers and suppliers. Contracts that are always focused on paying the least

or getting the most depending on whether the opposition is a supplier or a

customer.

I once took a business seminar in dealing with Korea and I can assure you

that everything Hynix has done so far is well within the range of tricks that

are routinely deployed in Korean contract negotiations.

So far, and much to my surprise, Micron officials have demonstrated that they

are fully aware of the wide range of tactics and strategies the Koreans will

deploy in order to get Micron to accept a deal on their terms. And as part of

their strategy, Micron has shown that it has developed a wide range of

counter-measures to blunt the Korean trickery.

Micron appears to have a clear idea of how much it wants to pay for Hynix.

And in order to get to that price, it is playing the Koreans like the Koreans

are trying to play the Americans. For one, the Koreans are masters in using time

as an element in the negotiations. But Micron has not given in to temptations to

get a deal quickly.

In the end, it will be a matter of who blinks first. So far the Koreans have

shown on several occasions that they are more eager to get a deal while Micron

has maintained a take-it-or-leave-it attitude. That has been driving the Korean

bankers, who are holding most of the cards in this came, up the wall. They want

to recover somewhere between 35 and 50 per cent of what they have invested in

Hynix. Micron is willing to give them only about 10 per cent by demanding that

the banks come up with even more money.

The latter is the absolute last thing the Korean banks want. So in the end,

the banks will probably settle for a deal in which they will recover 15-20 per

cent of their investments. They probably have long ago decided to accept such as

deal, but are merely holding out for another 5-10 per cent.

Since this represents some $500 million to them, they will continue to play

every trick in the book designed to throw the opposition off course. My guess is

that some time in March or April a deal will be reached and Micron will end up

with the Gold. And on this podium, there is no silver.