May 11, 1999
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| May 11, 1999 | atimes.com | |
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| The Koreas LG Group gets nod for takeover bid Bloomberg News Seoul- South Korea said it accepted LG Group's request to lift a 5 percent limit on its ownership of Dacom Corp., clearing the way for LG's purchase of the nation's second-largest telephone company. ''It's difficult for the government to justify enforcing the limit on only LG Group,'' said a spokesman for the Ministry of Information and Communications. ''It would also go against the global trend of consolidation in telecoms." The takeover of Dacom by LG, Korea's fourth-biggest conglomerate, would change the landscape of the country's $12 billion telecommunications industry, now dominated by state-owned Korea Telecom Co. Combining its existing mobile phone service with Dacom's fixed-line phone, Internet and planned satellite television services, LG could rival Korea Telecom, the only company that provides a full range of telecommunications services in South Korea. ''LG is claiming victory, as expected,'' said Jeff Kahng, a telecommunications analyst at ING Barings Securities Co. LG is already Dacom's biggest shareholder. Though it owns 4.21 percent of Dacom, its actual stake, including shares owed by LG's allies, exceeds 33 percent. LG Electronics Co. stock rallied on optimism the flagship of the LG Group will benefit from the acquisition. Analysts had expected the government to sympathize with LG because it agreed to hand over its profitable memory-chip business to Hyundai Group as part of a government-sponsored exchange of business units between Korea's industrial groups, known as chaebol. The government's decision ends a takeover battle between Samsung Group and LG Group. Samsung started accumulating Dacom shares after LG Group Chairman Koo Bon-moo told President Kim Dae-jung last week that his group will try to take over the phone company. For Samsung, which already makes cellular handsets and provides mobile phone service, Hanaro Telecom Inc., a new fixed- line telephone company owned by Dacom, offers prospects that are hard to pass up. Samsung's aim ''has probably always been to take over Hanaro, rather than Dacom,'' ING Barings' Kahng said. Hanaro, which started offering local telephone service on March 30, uses wireless local loop technology to provide local voice and Internet services. Like LG, Samsung is trying to develop its telecommunications service division as a core unit after agreeing to shed its peripheral businesses. Samsung Corp., a retailing arm of Samsung Group, formed a strategic alliance with Amazon.com Inc., aiming to boost its Internet shopping business. LG on Monday asked the government to scrap restrictions that have blocked it from buying Dacom, or the 1996 agreement under which it pledged to keep its stake in Dacom at less than 5 percent in return for a mobile phone license. Analysts said LG will try to buy Tongyang Group's stake to take over the company because rival Samsung, Korea's third- largest chaebol, now holds a stake of more than 23 percent. An LG Group spokeswoman, Sue Kim, denied a report in the Maeil Business Newspaper that LG agreed to buy Tongyang Group's stake for at least 607.6 billion won ($513 million). Kim said the two chaebol ''agreed to work together closely'' on Dacom but she declined to give details of the agreement. Kim Young-hoon, a Tongyang spokesman, said the group has yet to decide to whom it will sell its stake. | |||||||||
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