Ssangyong Motor sale likely a duel between KG Group, Ssangbangwool

The sale of troubled sport utility vehicle maker Ssangyong Motor Co. is likely to be a duel between chemicals conglomerate KG Group and SBW Group, a fashion business operator.

EY Hanyoung, the sale manager of South Korea’s Ssangyong Motor, will kick off its sale process this week with an aim to choose a preferred buyer as early as next week, according to industry officials on Monday.

After obtaining court approval, EY Hanyoung plans to adopt a stalking-horse method in the bidding process.

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.

SBW JOINS HANDS WITH KH GROUP

Several local companies have already shown interest in the SUV maker, and on Monday SBW Group, the parent of Korea’s leading underwear maker Ssangbangwool Inc., said it is teaming up with KH Group to raise its chance of winning the bid.

Kanglim Co., an SBW Group affiliate that makes special vehicles such as fire and tanker trucks, said in a statement that it has 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.

In the mergers and acquisitions market, KH Group is known for its successful bids for Grand Hyatt Seoul in 2019 and Alpensia Resort, the venue of the 2018 Winter Olympics, last year.

Another strong contender is KG Group, which is jointly bidding for Ssangyong Motor with Cactus Private Equity, a Seoul-based private equity firm.

The KG-Cactus consortium, given its financing strength, has a higher chance of winning the bid than other potential contenders that recently showed interest in Ssangyong Motor, according to industry sources.

KG Chemical, which works as the holding company of KG Group, had 363.6 billion won ($295 million) in cash and cash equivalents as of the end of 2021, while Kanglim, the flagship unit of SBW Group, had 73.3 billion won in cash reserves at end-2021.

PROPERTY DEVELOPMENT

Industry watchers said the companies that have expressed interest in Ssangyong Motor could be most interested in the development of the land on which the debt-laden SUV maker has its headquarters and manufacturing plants.

The value of Ssangyong’s main plant in Pyeongtaek, southwest of Seoul, is estimated at around 900 billion won, but if the property is reclassified as land for residential area, its value will likely rise above 1 trillion won, according to industry officials.

Ssangyong Motor and the Pyeongtaek city government are in talks to move the carmaker’s main plant to other parts of the country to develop the current property area.

Edison Motors Co., a local electric bus maker, 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 following the Seoul Bankruptcy Court’s approval of the acquisition plan.

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

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, virtually handing over management rights to Seoul Bankruptcy Court.

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

Write to Han-Shin Park at phs@hankyung.com
In-Soo Nam edited this article.