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.