By Kim Yoo-chul
Top-tier global home appliances brand Electrolux is considering buying Daewoo Electronics for $530 million, sources directly involved in the matter exclusively told The Korea Times Wednesday.
The amount is less than the Swedish firm’s earlier offer of $560 million but is still substantial, the sources said.
The renewed plan comes days after the main Daewoo shareholders including the state-run Korea Asset Management (KAMCO) and Woori Bank contacted bidders after refusing a request by Iran-based Entekhab to lower its acquisition price by about 50 billion won ($46.6 million).
``Electrolux is checking Daewoo’s balance sheet and income statement with a strong interest in buying the outfit,’’ said a source who asked not to be identified as he wasn’t authorized to speak to the media.
The comments came with Electrolux being widely expected to renew acquisition talks with Daewoo’s major shareholders within the next few weeks.
``We are quite positive that the shareholders and the reserve bidder will embark on negotiations on price in the not-too-distant future,’’ said the source, who added that Electrolux plans to look to Korea as a springboard to raise its presence in Northeast Asia.
A representative of Electrolux here said it still has a keen interest in Daewoo. A Daewoo spokesman declined to confirm the news because company policy dictates they not comment on such issues.
Yet, Daewoo seems to accept the valuation of $530 million. ``A small drop in the acquisition price would be acceptable,’’ added the unnamed source.
Mergers and acquisitions (M&A) have emerged as a key measure in the Electrolux’s global expansion strategy.
The Swedish outfit trails only Whirlpool of the United States, the world’s biggest home appliance maker, and is focusing on further external growth under new CEO leadership this year.
``Electrolux believes that Daewoo’s local sales channels are quite competitive to bolster its local presence in the shortest time because it can give better after-sales services to its customers,’’ said the source.
Electrolux reported record sales revenue of $14.76 billion with a $900 million operating profit for 2010 partly thanks to its business growth in the Asia-Pacific rim including Korea.
Electrolux officials said Korea is one of its key markets in Asia and added healthy growth here will help it raise more revenue in the mid- to long-term.
``Electrolux believes Korean consumers are paying more to buy upscale, luxurious home appliances and Daewoo will be able to play a pivotal role to win such demand,’’ said a source from the latter’s creditors.
Potential buyers have searched for over a decade for a buyer of the former unit of Daewoo Group. The group was once Korea’s largest conglomerate before it collapsed in 1999.
Previous attempts to find a buyer all failed.
Market analysts say Electrolux’s attempts of advancing into the Korean market means more competition for Samsung Electronics and LG Electronics in the nation’s quite lucrative home appliances markets.
``If Electrolux completes the deal with Daewoo Electronics, that will break the current duopoly of LG and Samsung for premium home appliances,’’ said an LG executive.
But Daewoo creditors are being asked to tackle legal threats by the Iranian industrial group Entekhab which is mulling taking Daewoo Electronics to court.
``We don’t think Entekhab will take legal action because it failed to meet creditors’ demand for a detailed and fine-tuned funding plan,’’ said the source.
In a statement, Entekhab said it will review its decision on the continuation of its cooperation with Daewoo and preserve its right to completely halt its business activities with the company.
Entekhab insists that nullification of the contract would be illegal and is asking Daewoo creditors to find a solution to the failed negotiations.