SK Telecom (Seoul, South Korea), South Korea’s largest wireless carrier, and STX Corp (Jinhae, South Korea), a trading services company, entered the fray to buy a $2.3 billion stake in Hynix Semiconductor (Icheon, South Korea), the world's No. 2 computer memory chipmaker.
Both companies said they had submitted their initial interest to creditors for the 15% stake in the first round of bidding which closed on Friday. A successful bid would mean a shift in focus and a first step into the computer chip business for either firm.
"The acquisition plan is not in line with what SK Telecom has presented for its future strategy," said Choi Yoon-mi, an analyst at Mirae Asset. "It is a distracting development when it has to put resources into the stated goal of growing its content and mobile platform operations."
Shares of SK Telecom tumbled as much as 6.8% on Friday to its lowest level in more than eight years.
"We expect the deal to pave the way for us in securing future growth from promising semiconductor industry, which will benefit from expanding smartphones, tablets and Internet TV segments," SK Telecom said in a statement.
"It will also help us shift away from intensively competitive local mobile market."
Shares of STX Corp edged up 0.7% after losing more than 6% in the past two days following its announcement of a likely bid for Hynix, which trails local rival Samsung Electronics. Prior to the auction closing, shares in Hynix were up 0.8%, while SK Telecom shares pared losses to close down 3.2%.
"The two firms seem quite serious about the bidding as STX Corp showed its financing plan with a Middle East fund at an early stage. This bid race could drive up premiums to over 10% to the current Hynix share price," said Nam Tae-hyun, an analyst at IBK Securities, a research and investment firm. "In terms of synergy, there's nothing much for the two bidders to gain from a Hynix deal."
Deutsche Bank cut its target price for SK Telecom by 8%, citing uncertain synergies from the potential deal.
"We suspect the primary motivation for SK Group could be the desire to shed its image as a domestic-oriented conglomerate, by acquiring a manufacturing exporter," it said in a research note.
Hynix declined to comment on the auction on Friday.
(Additional reporting by Hyunjoo Jin; Writing by Miyoung Kim; Editing by Muralikumar Anantharaman and Lincoln Feast)