A consortium of India's leading electronics and energy major, Videocon Industries Limited and US fund Ripplewood Holdings has emerged as the preferred bidder to buy South Korean appliances maker Daewoo Electronics.
According to sources close to the development, the creditors of Daewoo Electronics, including Wo-ori Bank and Korea Asset Management Corp., a State-run restructuring agency, have been offered $ 700 million for their 97.5 percent stake in the company by the consortium.
The consortium is 50.1 percent owned by Videocon with the rest held by Ripplewood.
If successful, it will be the largest foreign capital takeover of a Korean manufacturing firm and Videocon's third major acquisition in less than two years. Earlier, Videocon had acquired Thomson's global picture tube business and the Indian operations of Electrolux.
The deal would also rank as the biggest foreign investment by an Indian private company overtaking Tatas which picked up 30 percent stake in the US-based beverage maker Energy Brands Inc. for $ 677 million.
Videocon can become the new owner of Daewoo as early as December after two months of due diligence, said Mr. Park Ki-hoon of Woori Bank, one of Daewoo's main creditors.
Initially, five companies had made offers to the creditors, with the Malaysian fund company Neo Equity making the highest bid. However, the creditors turned down the offer due to doubts about the firm's ability to raise funds.
Korean equity firm MBK Partners was named as the reserve bidder.
Daewoo Electronics posted losses in 2005 and its earnings forecasts were not available. A creditor source had said banks wanted to sell the former unit of the failed Daewoo Group for more than $ 1 billion, considering its assets and business outlook.
According to market analysts, the acquisition will help Videocon become a serious global contender in the consumer electronics business with close to $ 4 billion in sales in its electronics business alone. Daewoo Electronics is estimated to have global sales of about $ 2.5 billion, whereas Videocon Industries' consumer electronics business is currently generating revenues of about $ 1.5 billion.
Though Daewoo Electronics is a distant third player in Korea, behind Samsung and LG, it has a strong brand recall in the developed markets including the US and the UK. It also has leadership position in certain segments in select markets including Poland and Vietnam. It operates six plants in South Korea and 18 overseas units.
Daewoo Electronics, which makes televisions, refrigerators and air conditioners, drew five bidders in August after its domestic creditors put their combined 97.5 percent stake of the unlisted firm up for sale.
Daewoo Electronics is one of major companies spun off from the Daewoo Group that was bailed out by creditors, after the parent group collapsed in 1999 with debts totalling $ 80 billion.
ABN AMRO, Woori Investment & Securities Co. and Samil PricewaterhouseCoopers are managing the sale.