LG, Samsung, Daewoo worry about fallout from Iran sanctions

By Kim Yoo-chul

Korean electronics firms are considering potential countermeasures that could be taken by Iran in the event Korea joins the United States to impose sanctions in retribution for its nuclear development.

Samsung and LG are saying that no adverse steps have so far been taken but are waiting to see how the situation can change in the coming weeks.

Creditors of Daewoo Electronics are facing prospects of a deal for a stake sale, being negotiated with an Iranian firm, not progressing.

On Thursday, Samsung Electronics said it has been reviewing all options to counter possible freezing of diplomatic ties between South Korea and Iran.

"Samsung currently doesn't see any negative effects in Iran due to political reasons. But we are not ruling out worst case scenarios," said Leonor Lee, a senior spokeswoman at Samsung.

Lee said the world's top TV maker is still safe with cash transactions and other pending issues, though she declined to unveil the sales portion in Iran out of Samsung's total revenue.

Samsung sells electronic devices and home appliances such as refrigerators and air-conditioners. Samsung leads Iran's consumer electronics market.

The situation with LG Electronics is not much different. Iran is one of the "top 3" revenue sources for LG in the Middle East.

LG also maintains a sizable presence in Iran, said an LG spokesman Jerry Kim.

"Some senior company officials from LG's Dubai affiliate have been dispatched to Tehran to check what happens, there," said Kim, adding LG Electronics is watching the situation with "keen eyes."

"So far, everything looks quite good despite rising political conflicts between Tehran and some others," Kim said.

South Korea's trade volume with Iran was around $10 billion last year. Iran, the world's fourth biggest crude oil producer, supplied 8.7 percent of South Korea’s oil in 2009.

Daewoo Electronics sale to vaporize?

But Daewoo Electronics is desperate as the stake sale talks with Iran's Entekhab Industrial Group may end up a complete failure.

Creditors of Daewoo are known to have contacted Sweden-based home appliance giant Electrolux as a back-up plan.

"If the talks fail, then creditors should go for the secondary bidder Electrolux for the sale," said a high-ranking creditor source, asking not to be identified.

Negotiations with Entekhab have stalled. Daewoo Electronics' chief executive Lee Sung earlier said the "July completion" for talks have been in the final phase due to price matters.

Entekhab was asking Daewoo creditors to cut the acquisition price for the South Korean company by 15 percent from the earlier price of 610 billion won ― a condition which is hard to accept.

"If South Korea joins its allies in sanctioning Iran and Entekhab is on the blacklist, then the stake sale will return to zero," said the official.

Daewoo Electronics spokesman refrained from giving any official comment on the political feud between Iran and other nations and how the moves would impact on the deal.

Entekhab was selected as the preferred bidder for Daewoo in April. This is the fourth attempt by the creditors to sell Daewoo.

Previous attempts, involving India's Videocon Industries, Morgan Stanley and U.S. private equity firm Ripplewood Holdings failed mainly due to differences over sales terms.

Daewoo was placed under a debt rescheduling program after its parent group collapsed in 1999 under huge debt. After restructuring, the company now focuses on making ovens, washing machine and refrigerators.