On Oct. 21, 64% of Hanaro Telecom’s shareholders voted to accept the $1.1 billion sale of 40% of the company to the buyout team of American International Group (AIG) and Newbridge Capital.
The purchase price includes a $500 million stock purchase and $600 million in loans, which will allow Hanaro to pay off $256 million in short-term loans. ABN Amro, JP Morgan and the Development Bank of Singapore are funding the debt package. Published reports have placed Hanaro’s debt above $2 billion.
The back-and-forth tug-of-war for the Korean telecom company seems to favor the AIG-Newbridge team for now, but the deal is far from complete. While the buyout duo did get majority approval from the vote, 20% of shareholders voted against the foreign companies taking over Hanaro. One in five shareholders showing discontent may be enough for Korean investor LG Group, the nation’s second-largest conglomerate, and a rival bidder, to go through with a rumored lawsuit to quash the deal. But don’t expect The Carlyle Group, LG’s partner on the attempted takeover, to go along with that strategy.
“We have no plans to sue anyone,” said a Carlyle source. “We have no regrets, even though that deal was right up our alley. It seemed we offered a better deal, but the shareholders thought otherwise. The key challenge is that we came in late in the process, making it difficult to properly educate the shareholders.”
The LG-led team offered roughly $140 million more than the AIG-Newbridge consortium.
LG Group’s foothold in the Korean telecommunications marketplace may be in jeopardy, as Hanaro is rumored to be gathering the resources for a bid to acquire Thrunet, an Internet access provider, which was recently delisted and filed a plan in bankruptcy court to sell out to Hanaro. Thrunet-with 1.3 million broadband Internet customers equaling 11% of the market share-will add substantially to Hanaro’s share in the market, which sits at about 30 percent.
Korea, with more than 33 million citizens with Internet access, is a burgeoning region that globally-savvy buyout shops will continue to target. KT Corp, Korea’s largest fixed-line telephone operator and Internet service provider, and Dacom, partially-owned by LG, are dealing with their own financial issues, and may soon be ripe for buyout.