IS Videocon buying Daewoo Electronics? Reports suggest that Daewoo Electronics’ CEO Lee Seung Chang has had a change of mind. He was quoted in an international daily saying that Daewoo was looking at a buyer who would be willing to invest far more in the company than what the Videocon-Ripplewood (a US private equity firm) combine have indicated. Daewoo also believes that Videocon’s offer of $650 million-700 million is on the low side.

However, Videocon president P.N. Dhoot thinks otherwise. “We are the preferred buyers according to Woori Bank (one of Daewoo’s creditors).” The Daewoo spokesperson declined to comment specifically on Chang’s position, though he did admit that Daewoo expects Videocon to “increase capital spending for continuing development of technology”.

Meanwhile, the other bidder, MBK, a South Korean private equity firm, has offered significantly more for Daewoo Electronics than Videocon. A PricewaterhouseCoopers (PwC) source in Seoul says that MBK is currently reserve bidders for Daewoo Electronics. PwC is advising Daewoo on the deal.

Clearly, the last mile jostling over terms has begun.

In November 2005, Daewoo Electronics was put up for sale by its creditors, which included Woori Bank and the Korea Asset Management Corporation, the state restructuring agency. This followed the Daewoo Group’s bankruptcy in 1999.

Initially, there were eight bidders, including Samsung, Kohlberg Kravis Roberts & Co. (KKR) and Whirlpool. KKR opted out after Daewoo failed to produce US law compliant financial statements. (Their spokesman didn’t comment.)

This isn’t Daewoo’s first attempt at selling out. It signed an MoU with US investor Walid Alomar & Associates in 1999 for $3.2 billion but that fizzled out. Clearly, Daewoo’s creditors who own 97.5 per cent of the company are keen on selling out fast given its sharp fall in enterprise valuation — from $ 3.2 billion in 1999 to $ 700 million now.

Strategic buyers have, of late, been outbid by funds in buyouts of distressed assets. But sellers have sometimes preferred strategic buyers because they bring a more considered viewpoint given their understanding of the business. Videocon must hope that Daewoo thinks along those lines.

Last year, Videocon bought Thomson’s picture tube business and Electrolux’s India operations. It has a stated ambition of becoming the world’s largest original equipment manufacturer. That’s where Daewoo, with its capacity of 5 million CTVs and 2.5 million refrigerators fits in. Videocon insiders say it may retain the Daewoo brand name; but relocate some of the plants. Daewoo operates six plants in South Korea and 18 overseas.

After Tata's takeover of Daewoo Trucks I think it's another small step towards Indo-Korean friendship.I wish Indo-Korean friendship Best of Luck and lots of Business .

It's not a friendship. It's call business.

Who the fu-k cares about friendship when there is a money involved?

I do.I think it's better to do business with friends.Considering India and S Korea have historical ties I'm sure these Businesses will grow in the future.

NEVER do business with a friend if you want to maintain a friendship in the future.


-lecture