Ssangyong Motor Sale Over the Hump... KG "Thorough Preparation to Ensure No Issues with Acquisition"

Ssangyong Motor Pyeongtaek Plant View

[Asia Economy Reporter Choi Dae-yeol] The court overcame a major hurdle on the 13th by accepting Ssangyong Motor's application and selecting the KG Group consortium as the new prospective owner. This comes two months after the sale to Edison Motors fell through. It is considered the last chance for Ssangyong Motor.

The sale is proceeding under a stalking horse method, where the final buyer can change if a candidate offers better terms during the upcoming public bidding process. However, the industry currently sees no company likely to present better conditions than the KG consortium. The market views KG Group as having a strong commitment to acquiring Ssangyong Motor and actively entering this deal.

KG stated, "As a conditional prospective buyer, we will thoroughly prepare to ensure no issues arise in the remaining acquisition procedures," adding, "We will do our best to promptly normalize Ssangyong Motor and contribute to national economic development by strengthening the competitiveness of the automotive industry and creating quality jobs."

The sale of Ssangyong Motor began in December 2020 when the major shareholder, India's Mahindra & Mahindra Group, withdrew its investment, leading Ssangyong Motor to file for corporate rehabilitation. In April of the following year, the court initiated the rehabilitation process and promoted a 'pre-confirmation merger and acquisition (M&A)' plan. Ssangyong Motor then selected EY Han Young Accounting Corporation as the lead sales agent and started the bidding process.

Ssangyong Motor Pyeongtaek Plant Main Gate

After competition among three companies, in November of the same year, Edison Motors, a domestic electric bus specialist, was selected as the preferred negotiation partner for acquiring Ssangyong Motor. However, concerns arose in the market as Edison’s sales scale was only one thirty-third that of Ssangyong Motor. With debts and normalization costs expected to reach at least 1.5 trillion KRW, questions were raised about Edison’s financial capability, as it offered about 300 billion KRW for the acquisition.

Ultimately, Edison Motors repeatedly clashed with Ssangyong Motor’s creditors and labor union and failed to pay the remaining acquisition amount of 274.3 billion KRW in March. Subsequently, Ssangyong Motor terminated the contract and relaunched the sale using the stalking horse method. Among the bidders?KG Group consortium, Ssangbangwool Group, and ELB&T?the KG consortium, which offered the highest bid of 900 billion KRW, was selected as the final winner on this day. The plan is to sign a conditional investment contract with the KG consortium as early as next week, proceed with the main bidding, and finalize the contract with the final buyer in July.

However, there are forecasts that normalization after the final acquisition will not be easy. The industry is closely watching what synergy KG Group, which has grown through mergers and acquisitions based on the chemical industry, will create by acquiring Ssangyong Motor. Financially, the outlook is positive. KG Group, originating from Kyunggi Chemical, has 29 domestic and international affiliates including KG Steel, KG Chemical, and KG Inicis. As of the end of last year, its asset size was 5.3464 trillion KRW, and sales were 4.9833 trillion KRW.

KG Tower, Jung-gu, Seoul

With affiliates and private equity funds joining the consortium, it is known that there is no difficulty in mobilizing funds. Cash assets reach 400 billion KRW, and they plan to secure an additional 500 billion KRW by selling some business units of affiliates. The fund mobilization capability is likely to positively influence the Korea Exchange’s decision on whether to maintain Ssangyong Motor’s listing, scheduled for the day.

However, it remains uncertain whether the KG consortium will present a rehabilitation plan satisfactory to the creditors. As conditions surrounding the automotive industry, such as electrification and autonomous driving, are rapidly changing, there are voices questioning their expertise. Nonetheless, KG Group has shown positive results in mergers and acquisitions unrelated to its existing businesses. Currently, it can sufficiently integrate steel business, secondary battery materials, and eco-friendly businesses with the automotive industry. How they will reach a compromise with the labor union demanding employment succession is also considered a key factor.