LG, Carlyle offer US$1.34 billion to acquire Hanaro
LG, Carlyle offer US$1.34 billion to acquire Hanaro
Agence-France Presse Seoul
South Korea's LG Group and Carlyle Group of the United States said on Wednesday they will jointly bid US$1.34 billion for Hanaro, South Korea's leading Internet service provider, hoping to trump a rival offer from a U.S.-led consortium.
"We signed a memorandum of understanding with Carlyle Group late on Tuesday to jointly take over Hanaro Telecom," said Jung Hong-shik, president of LG Corp.
Under the agreement, LG and Carlyle will invest $640 million to acquire a 50 percent stake in Hanaro, South Korea's second largest broadband carrier, and offer $700 million in syndicated loans to help turn around the financially weak company.
The consortium offered 3,400 won ($2.93) per Hanaro share under the deal which will see LG and Carlyle each holding 25 percent in order to jointly manage the company, according to the memorandum of understanding.
The price is 200 won higher than that of a rival consortium led by American International Group (AIG) and Newbridge Capital, who have offered $500 million to acquire a 39.8 percent controlling stake in Hanaro.
Newbridge Capital and AIG dismissed LG and Carlyle's bid as "non-binding" and "unrealistic."
"It is an unrealistic plan with no guarantee of making good on the conditions or fulfillment," they said in a joint statement.
Shareholders of Hanaro are scheduled to meet on October 21 to approve the stake sale to the AIG and Newbridge Capital consortium, which has been pushed by South Korea's SK Telecom, a major shareholder of Hanaro.
LG has threatened to use its some 18 percent stake in Hanaro to vote down the proposal while Hanaro has in turn taken legal action against LG to head off this eventuality.
The latest development of the joint offer LG and Carlyle now adds a new twist to what has become a very protracted bidding war for Hanaro.
LG said it will provide all necessary financial aid to Hanaro so that it will be able to repay any debt maturing in the course of the LG/Carlyle investment in the company, which is expected to be completed by the end of the year.
"LG will ensure that Hanaro will not be placed under a court receivership and exert full efforts to guarantee job security for Hanaro employees," said LG president Jung.
He said the acqusition would create maximum synergies through closer alliances with LG's other telecom businesses.
Kim Byung-Ju, Carlyle's Asia operations president, said the proposed transaction would create "the most desirable outcome" for Hanaro, its employees and shareholders and for South Korea's telecom industry.
He said the deal not only addresses Hanaro's near-term funding requirements but also creates an industrial group with all the elements needed to become the leading telecommunications service provider in South Korea.
"The consortium believes that the creation of a strategic partnership among Hanaro, Dacom and Powercomm will result in synergies, maximizing Hanaro shareholder and corporate value," he said, referring to two other telecom/internet companies that would be folded into the deal.
For its part, the AIG-Newbridge Capital consortium said the signing of a memorandum of understanding often fails to lead to actual payments and in many cases, the terms are subsequently changed.
In contrast, they said, the investment planned by Newbridge- AIG represents "reliable funds that will be ready by the end of October."
As for the proposal of LG, due diligence will only be possible at the beginning of next year and every aspect of the proposal is as yet unclear, they charged.
The AIG/Newbridge consortium has also offered to put together a syndicated loan of $1.1 billion, which they said will be sufficient to fund a long-term business strategy for Hanaro Telecom.
"We have a long-term vision to turn Hanaro Telecom into the most competitive communications company in Asia based on the 'best practices' of Newbridge and AIG," said Park Byung-Moo, president of Newbridge Capital Korea.