China refuses to approve SK hynix-Toshiba deal

By Kim Yoo-chul

In the latest standoff over attempts to purchase Toshiba’s NAND flash memory chip business pursued by a Korea-Japan-U.S. consortium, China’s regulators are seeking more protections for Chinese companies before approving the proposed purchase of the Toshiba unit.

That may jeopardize the consortium’s mega bid to close the deal, sources familiar with the issue told The Korea Times by telephone, Monday.

“They were saying the consortium’s proposed purchase of Toshiba’s NAND chip business will be affected by U.S.-China trade friction. The reality is Chinese regulators want the consortium to provide more remedies to protect Chinese companies before approving the plan,” one senior hedge fund manager at an investment bank said.

Out of the eight countries that the consortium requested for approval of the deal, China is the only one that has been delaying the approval of the proposed takeover plan. The approval by Chinese regulators has been delayed to May 1 after the consortium’s first attempt to close the deal failed.

“China has typical patterns in dealing with proposed takeover deals by foreign companies. The rationale is that the country wants them to transfer key technologies and to cut payments by Chinese firms for patents as a condition for approval,” said another source from a foreign investment bank operating in Seoul.

China is the world’s top market for semiconductors, including memory chips and non-memory chips. The country is spending significantly to build up its domestic industry.

SK hynix, the world’s No. 2 memory chipmaker and a latecomer in the booming NAND-type flash chip memory sector, is part of a group led by Bain Capital that is buying the Toshiba unit for $18 billion.

SK hynix doesn’t want to acquire the Toshiba unit given their long-term business partnership in the NAND business segment. What the SK Group’s chip unit wants is to provide financing for the deal through convertible bonds that could give it as much as 15 percent of the voting rights in the business, which is subject to change according to market circumstances…

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