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| Kwak Jae-sun, chairman of KG Group / Korea Times file |
By Baek Byung-yeul
The Seoul Bankruptcy Court chose a consortium led by the domestic chemical and steel conglomerate KG Group as a preferred bidder for debt-ridden SsangYong Motor, which has been seeking a new owner after a takeover deal with Edison Motors fell through, the court said Friday.
The court announced that it accepted SsangYong's application to seek a new owner and decided to name the consortium comprised of KG Group and local private equity firm Pavilion PE as the stalking-horse bidder for the carmaker.
On March 28, SsangYong said it canceled the deal to sell a controlling stake to a consortium led by local electric bus maker Edison Motors, after Edison failed to make an acquisition payment of 274.3 billion won ($213.5 million).
As a method of seeking a new owner, SsangYong and EY Hanyoung, an accounting company and the lead manager of the sale of SsangYong, chose a staking-horse bid, which refers to a process of an initial bidder setting the minimum price bar and other potential buyers having to outbid to become the new owner.
The KG-led consortium competed for a preferred bidder spot with Ssangbangwool Group and EL B&T, but sources said the KG consortium placed the highest bid at around 900 billion won, while Ssangbangwool bid around 800 billion won.
"SsangYong will sign a conditional investment contract with the KG consortium as early as next week and will announce the bidding to take over the carmaker later this month," a SsangYong spokesman said.
Under the stalking-horse bid system, if another candidate offers a better price than the KG consortium, the new bidder can take over SsangYong while the conditional contract between SsangYong and KG will be terminated.
SsangYong filed for court receivership in December 2020, after failing to repay around 160 billion won worth of loans, and subsequently its Indian owner, Mahindra & Mahindra, put the company up for sale.
Currently the SUV maker is around 1.5 trillion won in debt, and needs about 300 billion won in operating funds every year to normalize its operation.
KG Group said its waste management affiliate KG ETS submitted a conditional acquisition proposal to the sales manager of SsangYong. The group plans to secure 500 billion won by selling KG ETS's environment energy business division. The group also has around 400 billion won of cash and cashable assets.
If the consortium succeeds in acquiring SsangYong, it is expected to create synergy among affiliates of KG Group, which is active in steel, chemical and materials for electric vehicle batteries.
KG Steel, formerly Dongbu Steel, also had a business relationship with SsangYong, as it once supplied its automotive steel products to the carmaker. Although KG Steel no longer produces automotive steel products, the industry view is that the company may resume its production if KG Group acquires SsangYong.
