The transaction represents a partial buy back by SK Hynix, as MagnaChip was formed as spin-off from Hynix Semiconductor Inc. in 2004 and makes power, analog and mixed signal devices. It also marks a significant step by MagnaChip to turn itself into a fab-lite if not quite fabless chip company.
The deal, which has been discussed for more than a year, is worth $435m, including $345m in cash. It streamlines the business into a standard products vendor focused on analog, power and display drivers for OLED and microLED. MagnaChip said it would use the proceeds of the sale to reduce its debts.
The deal comprises $345 million in cash plus the adoption of about $90 million in severance liabilities to the staff that are transferring to the purchaser – the AC Consortium formed by Alchemist Capital Partners Korea Co. Ltd. an Credian Partners Inc. About 1,500 MagnaChip employees are expected to be transferred to the special-purpose company.
Alchemist and Credian serve as joint general partners of a project fund that established the SPC, while its limited partners are SK Hynix Inc. and Korean Federation of Community Credit Cooperatives. It was not disclosed what percentage of the deal SK Hynix. But SK Hynix can help provide expertise to continue operating the fab and is eager to diversify its offering away from memory chips.
MagnaChip’s CEO, YJ Kim, said: “We look forward to building upon our leadership position in the OLED display driver business and are excited about the emerging microLED space. Our power products portfolio, including premium power products, are aligned with the needs of a broad range of markets, and are ideally suited to serve the requirements of the electric vehicle segment of the auto market. Finally, we are confident there will also be myriad benefits for the foundry business and its employees, who will have significant new opportunities as a result of the transaction.”
“Following the completion of this sale, MagnaChip will be streamlined operationally, largely freed of interest expense and we believe will be ideally positioned for continued future success,” said Nader Tavakoli, chairman of the board of directors of MagnaChip.
Next: Still running Fab 3
MagnaChip will continue to operate its 200mm Fab 3, located in Gumi, Korea used primarily to manufacture wafers for power standard products and non-OLED display products.
The transaction is expected to close within approximately four to six months, subject to customary closing conditions.
The company said it had begun a strategic evaluation of the company’s foundry business and of the future for Fab 4 in Cheongju, in February 2019. Fab 4 is an analog and mixed signal fab responsible for 73 percent of its total capacity. It also makes standard products, but could opt to outsource manufacturing to whoever is the eventual owner of Fab 4 and the foundry business as well as to other sources.
Founded in 2004 by the spin-off of the non-memory chip unit of Hynix Semiconductor, and owned by Citigroup Venture Capital Equity Partners L.P., CVC Asia Pacific Ltd. and Francisco Partners, it inherited business lines from Hynix that included CMOS image sensors, LCD drivers and foundry services.
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