Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
SM Group, Edison Motors lead SsangYong Motor acquisition race
SsangYong Motor's vehicles are on display at the National 4X4 Outdoors Show in Melbourne, Australia in this 2019 photo. Courtesy of SsangYong Motor
By Baek Byung-yeul
By Baek Byung-yeul
As the deadline approaches for the selection of a preferred bidder to acquire debt-ridden SsangYong Motor, SM Group and a consortium led by Edison Motors are drawing attention again as the two strongest candidates, considering their ability to raise funds for the purchase, as well as for their business capabilities.
SsangYong Motor is set to receive bids from potential buyers until Sept. 15. Currently, 11 candidates submitted letters of interest, with the sale process being handled by accounting firm, EY Han Young. Seven candidates conducted due diligence on the carmaker, according to industry sources.
The potential bidders include SM Group, electric bus maker Edison Motors and U.S.-based Cardinal One Motors. Given the fact that an acquirer is required to invest between 800 billion won ($683.5 million) and 1 trillion won in order to operate SsangYong Motor smoothly, the ability to mobilize these funds is mentioned as a prerequisite condition for the acquisition.
SsangYong Motor previously unveiled a plan to strengthen its electric car business in order to keep up with the changing industry conditions and to solidify its status as the country's leading SUV maker by launching more sport utility vehicles.
Industry sources say that SM Group and Edison Motors are likely to become key players in the acquisition race, given the fact that they are capable of raising enough money and have solid plans to revive the cash-strapped automaker.
“To produce new car models, a constant influx of funds must be made available. In that sense, industry insiders view that the financially viable candidates are being mentioned as the strong candidates for the acquisition,” an industry source said. “Given the fact that SM Group has cash-equivalent assets of around 1 trillion won, the group would have no problem acquiring SsangYong Motor.”
The source said that SsangYong Motor may hope for SM Group to become its new owner, as the domestic company has a strong financial structure and plans to link its existing businesses, such as auto parts, aluminum production, battery manufacturing and chemical materials, with the automotive business.
Also, Edison Motors is being mentioned as another strong candidate, as the electric bus maker has teamed up with the private equity fund, Korea Corporate Governance Improvement (KCGI). But considering the fact that private equity funds always normalize companies and draw up exit plans in order to sell acquired companies to make a profit from them, this option may not be as attractive for SsangYong Motor.
SsangYong Motor has been looking for a new owner after its Indian partner, Mahindra & Mahindra, failed to attract an investor amidst the the COVID-19 pandemic, and the Korean automaker's financial situation worsened. In April, SsangYong was placed under court receivership.
With the carmaker struggling with financial problems, sales also declined. From January to July, sales fell 15 percent to 48,229 vehicles, from 56,849 in 2020.