Sale of Daewoo to Videocon in Trouble

From The Korea Times
October 10, 2006

The scheduled sales process of South Korea’s Daewoo Electronics to India’s Videocon is being delayed as there is disagreement over the sales price. Woori bank, one of Daewoo’s main creditors, said on Tuesday that it was uncertain when the two sides would agree on the conditions of the sale. The initial timeline for signing a memorandum of understanding (MOU) was the end of September. “The September deadline was only our hope”, said Park Ki-hoon of Woori Bank. “As of now, we cannot say when we will be able to bring about a result.” Daewoo, the third largest maker of consumer electronics in South Korea, has been in a workout program since 1999. Last month, creditors led by Woori Bank selected a consortium of Videocon and U.S. fund Ripplewood Holding as the primary bidder for Daewoo at a reported price of 670 billion won. The two sides said that they would sign an MOU within September and conclude the deal as early as December. But the talks have been prolonged as Videocon reportedly demanded a cut in the purchase price by up to 20 percent from its original bid. Woori’s Park refused to confirm the report, though he said some of it was true. A Daewoo official also admitted the discrepancy between Videocon’s offer and the creditors’ demands, and added the talks could break up. “If they fail to reach an agreement, then the reserve bidder will have their turn,” he said. MBK Partners, a private equity firm, was selected as the reserve bidder last month.Videocon is India’s largest consumer electronics maker, holding about 50 percent of the local TV market last year, mostly cathode ray tube TVs. The company has been looking for ways to strengthen its position in overseas markets such as the United States and Europe by buying out facilities of foreign firms. Last year, it acquired French firm Thomson SA’s color picture tube manufacturing facilities for $291 million, and the Indian unit of Swedish firm Electrolux for $76 million. Videocon is going to use the newly acquired facilities to produce flat-panel TVs as early as this December. MBK Partners, which could take over from Videocon, is a buyout fund set up by Michael Kim, a former senior executive of the Carlyle Group Asia. Financial News reported earlier this month that the fund is leading the bid for China Network Systems in Taiwan.