The long standing refusal of LG to cooperate with the South Korean government came to an abrupt end today, when the company said it will sell its chip division to Hyundai. LG Semicon will become part of Hyundai Electronics, and according to reports all the workers will transfer from the former to the latter.
The deal spells a victory for the South Korean government, determined that the big five chaebols (family concerns), should rid themselves of their uncompetitive units. Last month, US consultancy Arthur D Little, recommended that a merged chip company should be formed with Hyundai having 70 per cent of the equity. LG resisted the decision, threatened to sue ADL and hit out at what it claimed was intereference in its business.
But the South Korean government reacted with fury and creditor banks threatened to pull the rug from under LG Semicon, saddled with debt and loans. The Korea Herald will report in tomorrow's edition of its newspaper that LG is now scrapping with Hyundai over the amount of money it wants. The newspaper will say that LG wants $4.34 billion including a 60 per cent share in LG Semicon. But Hyundai thinks that amount of money is far too much. The negotiations are supposed to be finalised by the end of the month. According to the Herald, Hyundai will have to drastically restruct to raise cash, and there will no write offs of debts.®