Magnachip, up for sale again, contacts Samsung, LG, LX

South Korean chipmaker Magnachip Semiconductor Corp. is on the market again four years after the US blocked a takeover by a Chinese private equity firm, people familiar with the matter said on Sunday.

Magnachip listed on the New York Stock Exchange has selected a foreign investment bank as an advisor for the sale and has held talks with potential buyers including South Korea’s Samsung Electronics Co., LG Electronics Inc., LX Group, Doosan Group and DB HiTek Co., according to investment banking industry sources in Seoul.

Magnachip headquartered in South Korea produces display driver integrated circuits (DDICs) and automotive power semiconductors at its plants in the country.

The company is for now only seeking to unload Magnachip Mixed-Signal Ltd., the wholly owned DDIC subsidiary, leaving the door open for the sale of the entire firm should the buyer want, the sources said.

In 2021, Magnachip and Chinese private equity firm Wise Road Capital signed a $1.4 billion buyout deal, but Washington blocked the contract amid a protracted US-China trade dispute.

Wise Road had agreed to pay $29 in cash for each of Magnachip’s common shares to its shareholders at that time.

CHEAPER PRICE

Magnachip is expected to be sold at up to around 400 billion won ($274.3 million) as its share price has been falling on the prolonged downturn in the global display industry, investment banking industry sources in Seoul said.

Its market capitalization was only $150.7 million as of Jan. 31 when its stock closed at $4.05.

The world’s second-largest DDIC maker supplies products to Samsung. The South Korean tech giant, however, placed orders with other contractors such as DB HiTek and LX Semicon Co. to diversify suppliers.

Magnachip turned to a net loss of 59.4 billion won in 2023 from a profit of 16.3 billion won in 2022 as sales dropped 30.4% to 300.5 billion won.

The company remained attractive as it secured core source technology and sales networks, investment banking industry sources said.

“The sluggish display industry slashed its corporate value, which creates opportunities to buy it at cheaper prices,” said one of the sources.

LX, DOOSAN, DB

Magnachip is predicted to seek a buyer among South Korean companies and private equity firms since the US government is likely to again veto a deal with a Chinese company, the sources said.

LX Group is regarded as the top candidate as the conglomerate hopes to achieve economies of scale in the chip design and manufacturing business by combining its foundry affiliate LX Semicon with Magnachip, according to the sources.

The group failed to acquire Magnachip for up to 1 trillion in 2022 as the seller wanted more.

Doosan Group is also expected to compete for the takeover of the chipmaker as the conglomerate aims to foster its semiconductor back-end process affiliate Doosan Tesna Inc., industry sources said

Wonik Corp., a small Korean semiconductor company, and DB HiTek are also said to be interested in Magnachip, the sources added.

Write to Jun-Ho Cha at chacha@hankyung.com
 
Jongwoo Cheon edited this article.