SK Hynix May Give Up Option to Acquire Stake in Toshiba’s Chip Business

As SK Hynix, which is included in the preferential bidder in acquiring Toshiba’s semiconductor business, recently said, “We can give up on acquiring the stake,” all eyes are on the backdrop

An official from SK, which participates in a bid to take over Toshiba’s memory business, said on July 11, “Whether SK Hynix can recollect funds from a South Korea-U.S.-Japan consortium by converting them to convertible bonds (CB) is not key issues in the negotiation. We are seriously considering omitting terms on the equity acquisition in contract if there are obstacles to close the deal.”

Until now, SK hasn’t disclosed the details of the contract. However, the company said there is a possibility to give up the acquisition of shares in Toshiba’s memory business as the Japanese media recently pointed out that SK Hynix can attain the share.

Toshiba selected a consortium built around the public-private Innovation Network Corp. (INCJ) of Japan as its preferred bidder on June 21. Toshiba and the South Korea-U.S.-Japan consortium was planning to finalize the sale before its general shareholders meeting on June 28. However, the negotiation has been deadlocked.

The South Korea-U.S.-Japan consortium includes the government-backed Development Bank of Japan and U.S. private equity firm Bain Capital as well as SK Hynix which has invested 300 billion yen (US$2.62 billion or 3. 02 trillion won) in the deal. An official from SK said, “We added the article in appendix of the acquisition plan sent to Toshiba that loans can be converted to CB in the future. But, we are not sure whether or not Toshiba was well aware of the article when the company selected the preferred bidder.”

Some media are making efforts to arouse public opinion against SK Hynix’s acquisition of share in Toshiba’s memory unit by highlighting the fact that SK Hynix can engage in management when the South Korean company secures the share later.

An official from SK said, “The right to convert to CB itself is not the subject of anti-trust investigation. Even when we convert funds into CB, they are relatively small in size. Also, we are not assigning any director to board of directors. So, there are no concerns over the management rights and technology leaks.”

Nevertheless, SK Hynix announced that it can five up an option to acquire the stake in Toshiba. This is because the company is willing to set the cause for Toshiba and make a breakthrough for the negotiation which remain stalled.