Ssangyong Motor Acquisition Battle for ‘Business Breakthrough, Formation of a Three-Way Battle’ Fund Mobilization Power and Business Capability

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Ssangyong Motor’s takeover battle, which was initially expected to perform poorly, is heating up with the participation of domestic conglomerates and sizeable private equity funds. For the takeover battle to be completed successfully, the candidates’ ability to mobilize funds and business capabilities related to eco-friendly electric vehicles is critical.

According to Ssangyong Motor and the legal community on the 31st, due to the closing of the letter of intent (LOI) submission of EY Hanyoung Accounting Corporation, the lead manager for the sale of Ssangyong Motor, a total of nine companies participated.

The companies that jumped into the takeover of Ssangyong Motor this time were KS Project Consortium (3 companies including K-pop Motors), Edison Motors Consortium (2 companies including Edison Motors), Sam Riders Cardinal One Motors Sukjeon Park World Energy INDI EV Future Motors Consortium ( 3 companies including Hagen Solution) ELBNT, etc.

In the initial stage of the acquisition of Ssangyong Motor, the industry predicted that it would be difficult for a new acquisition candidate to appear because of the investment cost of 1 trillion won. For this reason, it was a two-way battle between Cardinal One Motors, a new corporation of HAAH Automotive, which was the existing preferred bidder, and Edison Motors, a domestic electric bus company.

However, as SM Group entered the electric vehicle market by creating synergies with auto parts affiliates Namseon Aluminum, Bexel, and chemical fiber maker TK Chemical, it was a three-way battle to take over Ssangyong Motor.

It is observed that it will depend on their ability to mobilize funds and eco-friendly electric vehicle business for them to complete the Ssangyong takeover battle. Ssangyong Motor plans to sell and relocate its Pyeongtaek plant to switch from producing existing internal combustion engine vehicles to eco-friendly vehicles and secure liquidity.

Since its establishment in 1988, SM Group, which newly appeared before the acquisition, has grown to 38th place in the business world (as of last year) through various mergers and acquisitions (M&A) in addition to the construction business.

The group’s total sales reached 5 trillion won last year, and it is known that SM Group plans to use the funds that will come in through its leading affiliate, SM Merchant Marine, and its funds to raise the acquisition price. However, it has been submitted to the KOSDAQ market headquarters of the Korea Exchange in the middle of this month, so the future progress remains to be seen. The securities industry expects the enterprise value of SM Merchant Marine to exceed 3 trillion won, thanks to the recent surge in shipping rates.

In Edison Motors, a consortium was formed with Keystone Private Equity (PE), a large domestic private equity fund, and Semisysco, a micro electric vehicle maker, to resolve doubts about its ability to mobilize funds. The Kang Sung Wealth Fund (KCGI) participation, which is currently under discussion, will also be decided as soon as CEO Kang Sung-bu, who is currently in the US, returns to Korea.

Edison Motors plans to develop Ssangyong Motor into a global electric vehicle producer based on the company’s electric motor and battery management system (BMS) technology and establish local joint ventures (JVCs) in countries worldwide to produce and sell eco-friendly vehicles. However, Edison Motors’ sales reached 89.7 billion won, less than one-third of Ssangyong’s (2.92 trillion won) sales. However, Edison Motors, which announced that it had secured 270 billion won from individual investors, plans to raise an additional 250 billion won through Semisysco’s capital increase and CB (convertible bond) issuance. In addition, it intends to prepare the acquisition funds by receiving 400 billion won from financial investors (FIs) such as Keystone PE.

With their participation, the position of Cardinal One Motors, the successor of HAAH Automotive, which was a strong takeover candidate, is narrowing. In the case of HAAH, annual sales in 2019 were only around 23 billion won. In particular, Cardinal One Motors Chairman Duke Hale recently announced that he plans to raise 400 billion won in funds to acquire Ssangyong Motors. Still, he has not explicitly disclosed the amount raised or key investors. HAAH has been questioning its ability to develop Ssangyong Motor since last year, demanding that Korea Development Bank provide a corresponding amount if it invests in the acquisition of Ssangyong Motor.

Ssangyong Motor and the lead underwriter for sale will review the submitted LOI package, select qualified candidates for preliminary due diligence, and conduct initial due diligence by the end of August. After the preliminary due diligence, after receiving the acquisition proposal in September, the preferred bidder is selected, and the paramount due diligence and investment contract are followed. The deadline for submitting the rehabilitation plan for Ssangyong Motor is September 1. The sale will likely be delayed until the end of October, depending on future sales schedules such as investment contracts.

After the closing of this letter of intent, Ssangyong Motor said, “Many companies that have submitted letters of intent are expressing their intention to acquire the vehicle to expand the electric vehicle business, so it is in line with the current eco-friendly vehicle conversion strategy.” It will be of great help in building a foundation for long-term survival.”

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