KG-led consortium named preferred buyer of Ssangyong Motor

A consortium led by chemicals-to-steel conglomerate KG Group has been named the preferred buyer of South Korea’s troubled sport utility vehicle maker Ssangyong Motor Co.

According to the Seoul Bankruptcy Court on Friday, the consortium of KG and two Seoul-based private equity firms – Cactus Private Equity and Pavilion Private Equity – has proven their fund-raising capability and normalization plans for the debt-laden carmaker.

The three-party consortium is known to have offered about 900 billion won ($700 million) to acquire Ssangyong Motor, beating another strong contender, a consortium led by SBW Group, a fashion business operator, which offered 800 billion won in acquisition funds.

A third bidder, local electric vehicle and battery startup EL B&T, has been excluded from the court’s review of the bidders’ proposals, according to EY Hanyoung, the sale manager of the debt-laden carmaker.

Ssangyong and EY Hanyoung will sign an initial share sale and purchase agreement with the KG-led consortium next week before holding an open bid, expected in June.

SBW CONSORTIUM CRIES FOUL

The Ssangyong Motor sale is being conducted through a stalking-horse method.

A stalking-horse offer is a form of initial bid for a beleaguered or bankrupt company, which chooses an entity from a pool of bidders and designates it the preferred buyer. And then later, the sellers – EY Hanyoung and Ssangyong Motor – hold an open bid, where other bidders can join and be named the final winner if they offer a higher price than the initial preferred buyer.

Industry watchers said there’s a slim chance of other interested parties offering higher bids than the KG consortium’s 900 billion won offer during the open bid.

Earlier, Pavilion PE offered to buy the SUV maker separately from the KG Group, which forged a tie-up with Cactus PE, but later the three parties joined hands to form a single consortium to win the bid.

SBW Group, which owns Korea’s leading underwear maker Ssangbangwool Inc. and special-purpose vehicle maker Kanglim Co., formed a consortium with KH Group, the subsidiaries of which include electronic lighting products maker KH Feelux Co., entertainment and talent management company iHQ Inc., also known as SidusHQ, and sound device maker KH Electron Co.

Regarding the KG-Cactus-Pavilion partnership, the SBW-led consortium cried foul, calling it “bid-rigging.” SBW said it may seek a court injunction against the KG-led group’s bidding. Separately, SBW said its consortium would participate in the open bid.

STRONGER FUNDING CAPABILITIES

The ongoing Ssangyong Motor sales process follows the collapse of a similar deal with Edison Motors Co., a local electric bus maker, in March.

Edison was initially named the preferred buyer of Ssangyong Motor in October of last year, and in January this year it signed a contract to acquire the SUV maker for 304.8 billion won.

But in late March, EY Hanyoung and Ssangyong declared that their talks with Edison broke down after the buyer failed to make full payment by the deadline.

Industry officials said the KG-led consortium has stronger funding capabilities.

KG Chemical, which works as the holding company of KG Group, had about 400 billion won in cash and cash equivalents as of 2021. The company also expects to receive about 500 billion won from its sale of KG Eco Technology Services Co. (ETS) in the second half of this year.

Ssangyong Motor is said to have 1.5 trillion won in debt. A successful buyer of the carmaker would also need about 300 billion won in operating funds annually, according to industry watchers.

In 2011, Indian automaker Mahindra and Mahindra Ltd. took over Ssangyong by purchasing a 75% stake at 523 billion won from China-based SAIC Motor Corp.

However, Mahindra held back on further investment in Ssangyong as it faced its own declining sales in India. It put Ssangyong up for sale in 2020, 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 Il-Gue Kim and Si-Eun Park at Black0419@hankyung.com
In-Soo Nam edited this article.