KG Group, Cactus PE to join race for Ssangyong Motor

South Korea’s KG Group, a chemicals conglomerate, and Cactus Private Equity, are joining the race for Ssangyong Motor Co., up for sale again next month after sales talks with a previous top bidder collapsed last week.

KG Group recently notified EY Hanyoung, the sale manager of Ssangyong Motor, of its decision to acquire the troubled Korean SUV maker, according to people with knowledge of the matter.

KG Group will team up with financial investor Cactus PE, a Seoul-based private equity firm, to bid for Ssangyong in May when EY Hanyoung plans to put the carmaker up for resale, the sources said on Wednesday.

The consortium, given its relatively strong funding capability, has a higher chance of winning the bid compared with other potential contenders that recently showed interest in Ssangyong Motor, according to the sources.

Last week, EY Hanyoung and Ssangyong Motor declared that their talks with Edison Motors Co. collapsed after the small Korean electric bus maker failed to make full payment by the deadline.

Edison Motors was named the preferred buyer of debt-laden Ssangyong in October of last year, and in January this year it signed a contract to acquire the SUV maker for 304.8 billion won ($249 million) following the Seoul Bankruptcy Court’s approval of the acquisition plan.

However, the proposed stake sale to Edison was canceled as the buyer didn’t pay the balance by March 25 after paying 10% of the acquisition fee earlier.

Ssangyong said the aborted deal is a foregone conclusion, but Edison on Tuesday sought a court injunction to retain its status as the preferred negotiator.

On Wednesday, Edison also took the case to the Supreme Court to revive its bid for Ssangyong. The company said it plans to form a consortium with Kumho HT Inc., a Kosdaq-listed automotive lighting component maker, to renew its bid for Ssangyong.

SBW GROUP, ENPLUS ALSO INTERESTED

A couple of Korean companies have already shown interest in Ssangyong Motor since talks with Edison Motors broke down.

SBW Group, which includes the country’s leading underwear maker Ssangbangwool Inc., said last Thursday it will bid for Ssangyong by forming a consortium with Kanglim Co., an SBW Group affiliate that makes fire and tanker trucks.

Enplus Co., a local fire engine and safety equipment maker, has also said it will bid for the SUV maker once it’s up for sale again.

However, industry watchers doubt the two bidding groups’ funding abilities.

SBW Group had 271.3 billion won in cash and cash equivalent at the end of 2021.

Enplus, which is seeking financial investors to jointly bid for Ssangyong Motor, had about 5 billion won in cash reserves at end-2021.

Meanwhile, KG Chemical, which works as the holding company of KG Group, had about 360 billion won in cash reserves as of the end of last year. The company expects to receive about 500 billion won from its recent sale of KG Eco Technology Services Co. (ETS) in the second half of this year.

EY Hanyoung estimates Ssangyong Motor’s liquidation value, including the carmaker’s assets and property, at about 1 trillion won. Industry officials said the acquisition of the SUV maker would require at least 1.5 trillion won, including operation funds and 937 billion won in debt.

SECOND KG-CACTUS PARTNERSHIP

A consortium between KG Group and Cactus PE would mark their second partnership since 2019 when they jointly acquired Dongbu Steel which was under a court-led debt restructuring workout program.

The KG-Cactus consortium at the time acquired Dongbu Steel, later renamed as KG Steel, for 360 billion won and turned it around through vigorous restructuring.

Last year, KG Steel posted 306.9 billion won in operating profit on sales of 3.35 trillion won.

Ssangyong Motor came under court receivership in December 2020 after amassing huge debt.

In 2004, China-based SAIC Motor Corp. acquired a 51% stake in Ssangyong but relinquished its control of the carmaker in 2009 in the wake of the global financial crisis.

In 2011, Indian automaker Mahindra and Mahindra Ltd. took over Ssangyong by purchasing a 75% stake at 523 billion won. However, Mahindra held back on further investment in Ssangyong as it faces its own declining sales in India. It put Ssangyong up for sale in 2020, while virtually handing over management rights to Seoul Bankruptcy Court.

Ssangyong's automobile lineup consists of the Tivoli, Korando, Rexton and Rexton Sports SUVs.

The beleaguered SUV maker could face liquidation if it can’t find a buyer by the court-set deadline of Oct. 15.

Write to Si-Eun Park at seeker@hankyung.com
In-Soo Nam edited this article.