SsangYong hopes SM Group becomes new owner
SsangYong Motor's plant in Pyeongtaek, Gyeonggi Province / Courtesy of SsangYong Motor
SM Group, Edison Motors consortiums viewed as top hopefuls
By Kim Hyun-bin
The race is heating up to become the new owner of SsangYong Motor, which industry watchers believe will come down to two firms ― SM Group and Edison Motors.
Edison and SM Group are among the nine companies that submitted letters of intent to take a majority stake in SsangYong Motor, with the sales process being managed by Ernst & Young Han Young.
“Edison and SM Group are likely to become key players to acquire SsangYong Motor,” an industry official said. “Many of the other mid-size companies are taking part in the acquisition for an opportunity to promote their company and get their name out there, and it will be difficult for them to obtain the proper funds.”
SsangYong is hoping for SM Group to become its new owner as the Korean corporation seems to be the best fit to help it recover from its financial struggles.
“SM has a strong financial structure and detailed financing plans. SM Group also took part in the acquisition procedures against Mahindra. Therefore, SsangYong employees are backing SM's participation,” a senior industry official said. “In terms of chemical combination, SM's acquisition of SsangYong Motor, if it actually happens, will be beneficial to both as SM aims to expand its profile in automotive parts.”
SM Group is also preparing to list its cash-cow affiliate SM Line on the Kosdaq, with the company value coming out at around 3 trillion won. Through the funds acquired via its IPO, the company plans to allocate 1 trillion won in acquiring SsangYong Motor. SM has Hwajin, Namsun Aluminum and Bexel under its company umbrella.
SsangYong shows strength in the SUV sector, which industry watchers believe will be able to find synergy with SM Group and compete in the global electric SUV market.
SsangYong Rexton Sports pickup truck / Courtesy of SsangYong Motor
Earlier this week, the Korea Corporate Governance Improvement (KCGI) fund formed a consortium with Edison Motors, Keystone Private Equity and two other investors to enter the acquisition race.
Edison Motors is a local electric bus manufacturer and one of the first companies to show interest in acquiring SsangYong after it was placed under court receivership in April.?
The major problem was with funding, as acquisition of SsangYong Motor is estimated to cost 1 trillion won.?Edison Motors reported a 1.5 billion won net loss last year and only a 2.6 billion won profit the previous year.
“Edison Motors is in a consortium with private equity funds, and once SsangYong normalizes operations there is always the possibility the private equities will cash out and exit,” another industry official said.
SsangYong has been posting net losses every quarter since the fourth quarter of 2016. Its liabilities stood at 1.9 trillion won last year.
The preferred bidder is scheduled to be named in September and the entire acquisition process could be completed within in this year, said SsangYong creditors. Korea Development Bank (KDB), the ailing carmaker's top creditor, said, “We will be discussing the acquisition matter with the applicants and trying to come out with an outcome for the better.”
Once the acquisition is complete, KDB is set to provide more financial aid for SsangYong to normalize its operations.
“SsangYong has been asking to increase the amount of secured loans for the company factory land but is only providing 14 percent of the land cost,” said an official of the local banking industry who is familiar with the issue.