LX Group pools in The Carlyle Group to go after Magnachip Semiconductor

South Korea’s LX Group separated from LG Group since last year has pooled in global private equity capital The Carlyle Group to raise its chance in the acquisition of Korea-based non-memory chipmaker Magnachip Semiconductor Corp. requiring U.S. endorsement.

According to multiple sources from the investment bank industry on Wednesday, LX Group has recently submitted a letter of intent to JP Morgan overseeing the sale of Magnachip Semiconductor.

Magnachip Semiconductor was founded in 2004 based on the non-memory business of Hynix Semiconductor, now the world’s No. 2 memory maker SK hynix. It is mostly owned by U.S. capital and listed on the New York Stock Exchange.

In March last year, Magnachip Semiconductor entered into sales agreement with Chinese private equity firm Wise Road Capital but the deal was nullified due to opposition by the U.S. government regulating U.S.-invested technology transfer to China.

LX Group began reviewing the acquisition of Magnachip Semiconductor when the deal with Wise Road Capital officially terminated.

LX Group has under its arm LX Semicon that makes chips for display driver integrated circuits going into TVs and smartphones.

Local investors did not welcome the news. Shares of LX Semicon opened Thursday in Seoul 2.5 percent lower at 127,600 won, and LX Holdings 1.1 percent down at 9,600 won.

Magnachip Semiconductor is also competitive in DDI and power chips. It commands second largest market share in global DDIs after Samsung Electronics Co.

Although businesses overlap, LX Semicon and Magnachip focus on different chip market according to the size of the chip and price.

LX could raise synergy by leveraging on Magnachip’s power chip to strengthen automotive electronics partnership with LG Electronics.

LG Group under government-led industrial restructuring in the wake of Korean liquidity crisis in late 1990s was forced to hand over semiconductor business to Hyundai Electronics which created Hynix Semiconductor. LX Group Chairman Koo Bon-joon has backbone in electronics components, having started his career at GoldStar Semiconductor and worked in LG Display and LG Electronics.

Magnachip’s value has come down from $1.4 billion earlier signed with the Chinese capital.

Magnachip Semiconductor shares on NYSE were trading at $17.33 on Tuesday. Its market cap is about $778 million.

Investment banks put its value at around $1.2 billion.

LX Group is expected to raise $600 million on its own and draw $300 million from The Carlyle Group. The private equity firm has been expanding equity investment in major Korean companies. Earlier this year, The Carlyle Group bought a 10 percent stake in Hyundai Glovis.

Local private equity firm Hahn & Company and U.S. sensor manufacturer Littlefuse are also known to have handed in preliminary bid. Local venture capital NVC Partners founded by KAIST engineer is also in the race.

Since separation from LG Group, LX Group has been eagerly bulking up through M&As.

In March, LX International, a trading firm under LX Group, acquired glass manufacturer Hanglas for 592.5 billion won. The company also bought a stake in Poseung Green Power, a local biomass power plant operator, last month.

LX Pantos carried out 31.1 billion won equity investment in North American logistics firm Traffix.

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