Published: Tuesday, 5 Jul 2011 | 11:20 PM ET
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South Korea's Hyundai Heavy Industries said on Wednesday it would not bid for a 15 percent stake in Hynix Semiconductor, putting the potential $2.3 billion deal in jeopardy again and boosting Hyundai's shares more than 5 percent.
Concerns about exposure to the notoriously volatile chip industry and synergies between the world's No.1 shipbuilder and No.2 chipmaker have pressured Hyundai Heavy's shares in recent weeks.
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"We have decided not to submit a letter of intent for Hynix," Hyundai Heavy said in a filing to the Korea Exchange.
The firm said in a separate statement that the move was based on the view there would be few synergies between its business and the chip sector. Hyundai has been the sole potential investor to publicly express interest in Hynix.
The move, just ahead of Friday's initial bid deadline, leaves the third sales attempt by creditors-turned-shareholders of Hynix in jeopardy. Its shares fell more than 4 percent on Wednesday.
An official at Korea Exchange Bank, which is a part of the selling shareholder group, said they will go ahead with the original auction schedule.
'No Bidders Yet'
Creditors rescued Hynix from a debt crisis in 2001 stemming from one of the industry's worst downturns. They have since scaled down their stake but have failed to complete a full sale, with investors reluctant to make a risky jump into the cyclical memory-chip sector.
They have been tapping Korea's big business groups to attract bidders and planned to allow Hynix to sell up to 10 percent of new shares as a part of the auction to raise the odds of success.
"There are no bidders who have submitted their interest yet and we are quite concerned about the auction," said a source who has direct knowledge of the deal.
Shares in Hynix were down 4.5 percent and those in Hyundai Heavy had jumped 5.7 percent on Wednesday morning.
Hyundai Heavy shares have dropped around 11 percent over the past month since it first flagged its potential interest in Hynix, lagging a 2 percent gain in the wider market [.KS11 2171.19 
9.44 (+0.44%)].
9.44 (+0.44%)].Nine shareholders including KEB, Shinhan Bank and Woori Bank are offering 88.5 million shares of Hynix worth around 2.5 trillion won ($2.3 billion) at the current market value.
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