Hon Hai acquires 4.9-percent stake in South Korean IT firm

By Ted Chen, The China Post

TAIPEI, Taiwan — Hon Hai Precision Industry Co. (鴻海) yesterday announced that its subsidiary Best Leap Enterprises Limited has acquired a 4.9-percent stake in South Korean information technology services firm SK C&C at the cost of about 380.975 billion won, or NT$11.2 billion.

The transaction was completed on June 27, with the Hon Hai subsidiary acquiring 2.45 million SK C&C shares at the price of 155,500 won per share, representing a discount of about 6.6 percent.

SK C&C is the information technology arm of the SK Group, the third largest conglomerate in South Korea. The company’s operations include applications in the financial, energy, logistics, multimedia, education and medical sectors, with products and services ranging from electronic commerce platforms, smart cards, energy management and storage systems, smart utilities meters, enterprise mobile platforms, cloud computing and automotive electronics.

Industry experts stated that Hon Hai may be intending to utilize the acquisition deal as a gateway to further collaborative initiatives with SK Group’s telecoms arm.

Most notably, Hon Hai shares yesterday propelled the TAIEX to the 9358.47-point benchmark, the highest seen in about six years, representing about 13.8 percent of yesterday’s trading volume. Hon Hai shares yesterday closed at NT$100, gaining NT$1.4 or 1.42 percent. SK C&C shares yesterday also surged 1.8 percent, reaching an intraday high of 169,500 won yesterday on the Korea Stock Exchange.

According to Johnson Tsai (蔡明彰) of Marbo Securities Investment Consulting Enterprise (萬寶投顧投資), the acquisition deal is in line with previous hints of the company’s intent to ramp up expansionary efforts announced during Hon Hai’s recent shareholders’ meeting.

In addition, Tsai noted that the acquisition represents Hon Hai Chairman Terry Gou’s resolve in capturing the South Korean market. The acquisition of SK C&C may mean a beachhead for South Korea’s information technology services market, a sector that Hon Hai is not unfamiliar with, said Tsai.

The ulterior prize for Hon Hai may be South Korea’s automobile market, according to Tsai, while citing growing ties between the world’s largest contract manufacturing company and U.S.-based electric carmaker Tesla Motors. Tsai stated that Hon Hai may test the waters of the South Korean auto market with a trial run through the used-car niche, and skirt the country’s stiff 200-percent tariffs imposed on imported cars. The potential is boundless if Hon Hai succeeds in establishing early success in South Korea, paving the way for further collaborative efforts with Tesla, Tsai said.

Meanwhile, Tsai reminded the investing public to take heed as Hon Hai shares approach a new threshold at the NT$100 benchmark, stating that volatility may rise rapidly as investors take profits.