SM Group, Parts Subsidiaries Create Synergy Entering Electric Vehicle Market
[Asia Economy Reporter Ki-min Lee] As Ssangyong Motor, which is seeking a new owner, closes the submission of letters of intent (LOI) on the 30th, SM (Samra Midas) Group has also entered the acquisition race.
On the same day, SM Group plans to submit a letter of intent to acquire Ssangyong Motor to EY Han Young Accounting Corporation, the lead sales agent for Ssangyong Motor. SM Group believes that acquiring Ssangyong Motor through its automotive parts affiliate Namseon Aluminum will enable it to make a full-scale entry into the electric vehicle market.
SM Group is a large corporation designated as a mutual investment restriction business group after surpassing 10 trillion won in assets in the '2021 Publicly Announced Business Group Designation' announced by the Korea Fair Trade Commission in May this year.
Since its founding in 1988, SM Group has grown to rank 38th in the business world (as of last year) through various mergers and acquisitions (M&A) in addition to its construction business. It also showed interest in acquiring Ssangyong Motor in 2010. It is known that SM Group plans to prepare acquisition funds by utilizing capital raised through the IPO of SM Shipping.
Ssangyong Motor and EY Han Young Accounting Corporation, the lead sales agent, will accept letters of intent until 3 p.m. on the same day. Ssangyong Motor plans to conduct preliminary due diligence from August 2 to 27 for candidates who pass the screening among those who submitted letters of intent by the deadline.
After the preliminary due diligence and receipt of acquisition proposals, a preferred negotiation partner will be selected to proceed with the main due diligence and investment contract steps. Internally, Ssangyong Motor has planned to select the preferred negotiation partner by the end of September and conduct price negotiations by the end of October. The deadline for submitting Ssangyong Motor's rehabilitation plan is September 1, but it is highly likely to be postponed to after the end of October depending on future sale schedules such as investment contracts.
So far, the only party that has submitted a letter of intent is K-Pop Motors, a domestic electric scooter company. K-Pop Motors submitted its letter of intent the day before, preparing acquisition funds of 380 billion won, and it is known to plan an additional 1 trillion won if selected as the preferred negotiation partner.
Cardinal One Motors, established by Duke Hale, founder of the U.S. automobile distributor HAAH Automotive, and Edison Motors, a domestic electric bus manufacturer, are also expected to submit letters of intent on the same day for the acquisition of Ssangyong Motor.
Chairman Hale and Chairman Kang Young-kwon of Edison Motors recently expressed their firm intention to acquire Ssangyong Motor in media interviews. Chairman Kang stated, "We have secured 270 billion won in acquisition funds from individual investors and others," and added, "There are some matters to coordinate, so we decided to submit the letter of intent on the 30th."
However, for the acquisition and merger of Ssangyong Motor, which requires massive funds, to proceed smoothly, the financial mobilization capability of the acquisition candidates is essential. Considering Ssangyong Motor's public interest bonds and future operating expenses, the actual required acquisition amount is estimated to be between 800 billion and 1 trillion won.
However, these companies' own sales fall far short of Ssangyong Motor's sales. In the case of HAAH Automotive, annual sales were only about 23 billion won as of 2019. Last year, Edison Motors' sales were 89.7 billion won, less than one-thirtieth of Ssangyong Motor's sales (2.9297 trillion won).
Meanwhile, Ssangyong Motor has recently started the sale of its Pyeongtaek plant as a self-help measure to secure liquidity and is conducting unpaid leave for employees for up to two years.
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