Four-Way Battle for Ssangyong Motor Acquisition... What’s Next on the Schedule?

KG Group, Ssangbangwool Group, Pavilion PE, and ELB&T Narrowed Down

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Hyun-seok] The acquisition battle for Ssangyong Motor has turned into a four-way contest with the participation of EL B&T, an electric vehicle parts manufacturer.

According to the investment banking (IB) industry on the 23rd, there are officially four candidates for acquiring Ssangyong Motor: KG Group, Ssangbangwool Group, Pavilion PE, and EL B&T.

After the merger and acquisition (M&A) with the Edison Motors consortium fell through, Ssangyong Motor is pursuing a resale using the 'Stalking Horse' method, which involves signing a conditional investment contract with a prospective buyer and finalizing the acquirer through a public bidding process.

The four parties who submitted letters of intent will conduct preliminary due diligence on Ssangyong Motor by the 4th of next month. They will then decide whether to proceed with the final bid. Typically, acquisition proposals are accepted within five business days after the preliminary due diligence ends. A conditional acquirer is expected to be selected by mid-next month. It is also anticipated that Ssangyong Motor and the conditional acquirer will sign a conditional investment contract.

KG Group is understood to be acquiring Ssangyong Motor in partnership with the private equity firm Cactus Private Equity (PE), while Ssangbangwool Group is forming a consortium centered on its affiliate Kwanglim along with KH Philux. Pavilion PE plans to form a consortium with financial institutions and automotive-related companies. EL B&T is expected to raise acquisition funds for Ssangyong Motor through overseas capital attraction.

Meanwhile, on the 21st, Ssangyong Motor submitted a petition and a letter of appeal to the Korea Exchange's Seoul office in Yeouido, Seoul, requesting an extension of the delisting improvement period. The petition included requests from Jeong Jang-seon, mayor of Pyeongtaek, and the Pyeongtaek Chamber of Commerce and Industry. Notably, this submission was made jointly by the Ssangyong Motor labor union and the company, showing labor-management cooperation.

Ssangyong Motor faced delisting reasons due to the auditor's refusal of the audit opinion on its 2020 financial statements and was granted a one-year improvement period. However, it failed to resolve the delisting reasons through attracting investors and improving its financial structure within the improvement period, resulting in another refusal of audit opinion last year.

Sun Mok-rae, chairman of the Ssangyong Motor labor union, emphasized, "The sale was canceled because the acquirer failed to pay the acquisition price," adding, "Ssangyong Motor is once again facing the risk of delisting as the improvement period to resolve the delisting reasons has ended."

Chairman Sun stressed that if a delisting decision is made for Ssangyong Motor, it would cause significant obstacles to the resale. He said, "This is directly related to the survival of 50,000 small shareholders and 200,000 workers including partner companies," and warned, "If delisted and the resale fails, it could trigger a terrible aftermath of bankruptcy, leading to an irreversible catastrophe."

He emphasized the need to extend the improvement period as a successful sale would allow Ssangyong Motor to escape capital erosion. He explained, "Maintaining Ssangyong Motor's listing is an absolute condition for normalizing the company through resale," and "If the sale succeeds, it can overcome the capital erosion that is a cause for delisting."

Park Jang-ho, head of production (executive director), also said, "If a new owner comes, capital will be expanded," adding, "This will sufficiently resolve the delisting conditions."

Jeong Jang-seon, mayor of Pyeongtaek, said in the petition, "Since 2009, Ssangyong Motor has led labor-management harmony as a workplace without disputes or conflicts," and "In the company's management crisis, Ssangyong Motor workers are participating in pain-sharing through a proactive self-help plan approved by a general meeting vote."

He explained, "The self-help plan includes suspension of welfare for three years, a 20% wage cut for two years, and agreement to implement unpaid rotational leave every other month with the reduced wages," adding, "Moreover, although unpaid wages amount to 140 billion won, they agreed to defer the payment of unpaid wages."

He emphasized, "For Ssangyong Motor to grow into a sustainable company, it is essential to secure a competitive investor and complete the sale as soon as possible," and "However, maintaining the listing is essential to attract competitive investors, so we request an extension of the improvement period to allow Ssangyong Motor to resolve the delisting reasons through the sale."