Ssangyong Motor's 'Three-Way Acquisition Battle'... The Key Is 'Funding', Delisting Is a 'Variable'

[Asia Economy Reporter Hwang Junho] KG Group, Ssangbangwool Group, and Pavilion Private Equity (PE) have stepped forward to acquire Ssangyong Motor. One of these parties is expected to be selected as the prospective acquirer within this week, with the key issue anticipated to be whether acquisition funds can be secured. However, whether Ssangyong Motor, which has not received audit opinions for two years, will be delisted is expected to act as another variable in the acquisition battle.

Acquirer Selection Possible as Early as This Week

[Image source=Yonhap News]

According to industry sources on the 11th, as of this day, Ssangyong Motor and the sales advisory firm EY Hanyoung have received conditional acquisition proposals from a total of three parties: KG Group, Ssangbangwool Group, and Pavilion Private Equity. Prior to the proposal submission, ELB&T also participated in the preliminary screening but did not submit a proposal.

The winner among these will be decided as early as the 13th. Ssangyong Motor will select the prospective acquirer (preferred bidder) based on their proposals using the 'Stalking Horse' method. The Stalking Horse approach involves signing a conditional investment contract with the preferred bidder and then conducting an open auction; if no candidate offers better contract terms, the preferred bidder is finalized as the acquirer. This method is praised for shortening the sales period while potentially increasing the sale price. According to this method, the preferred bidder will be selected on the 13th, with the conditional investment contract expected to be signed and the public bidding to begin the following week.

The Key Issue: Acquisition Funds

Following Edison Motors' failure to secure funding and thus failing in the merger and acquisition (M&A) of Ssangyong Motor, it is expected that Ssangyong Motor will focus intensively on whether the acquirer can secure sufficient financial resources. It is also reported that Ssangyong Motor has stipulated the provision of operating funds before acquisition as a condition.

Industry insiders estimate that the acquisition price for Ssangyong Motor will be between 400 billion and 600 billion KRW. The acquisition payment must cover the repayment of rehabilitation secured claims and rehabilitation bonds. Additionally, the creditors are said to insist on receiving a higher amount than the 304.9 billion KRW offered by Edison Motors. Ssangyong Motor currently has debts totaling approximately 1.5 trillion KRW, including 835.2 billion KRW in rehabilitation bonds and secured claims and 779.3 billion KRW in public interest bonds. To normalize the company after acquisition, about 300 billion KRW in annual operating funds will also be necessary.

However, a variable in this acquisition battle is expected to be whether Ssangyong Motor will be delisted. Ssangyong Motor has faced audit opinion rejections in 2020 and 2021, putting it at risk of delisting. The Korea Exchange will hold a Market Listing Committee meeting by the 17th of this month to decide whether to maintain Ssangyong Motor's listing or grant an improvement period (within one year). If Ssangyong Motor is delisted, it may become difficult for the acquirer to attract external funding.