Creditors put Daewoo Electronics up for sale
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Daewoo, one of South Korea’s largest makers of white goods and televisions, has been put up for sale by its creditors in a deal worth up to $1bn that could attract interest from Chinese rivals and private equity groups.
People close to the situation said ABN Amro, PwC and South Korea’s Woori Bank had been appointed to find a buyer for the business, formed in 2002 after the collapse of the Daewoo conglomerate under $80bn of debt.
The sale of Daewoo Electronics, likely to be completed in the first half of next year, would be another step in the restructuring of Korea’s industrial sector, which was hit hard by the 1997-98 financial crisis.
Several other companies, including Daewoo Construction and the logistics group Korea Express, are set to be auctioned off by creditors next year.
Daewoo Electronics could provide an opportunity for the many Chinese companies seeking to add international exposure and well-known brands to their low-cost manufacturing base.
Investment bankers said they had already contacted Haier, China’s leading white goods manufacturer, to gauge its interest.
Earlier this year Haier underlined its international ambitions with an attempt to buy Maytag of the US, the maker of Hoover vacuum cleaners. Haier eventually lost out to bigger rival Whirlpool.
Daewoo Electronics, whose main creditors include the state restructuring agency Korea Asset Management Corporation and Woori Bank, has undergone a radical restructuring aimed at returning it to profit.
The company does not disclose profits but it is believed to have recorded earnings before interest, taxation, depreciation and amortisation of more than $100m last year. According to Daewoo Electronics’ website, sales in 2005 are set to reach $2.96bn, with the bulk of the turnover coming from digital products such as plasma and LCD TVs.
Although Daewoo Electronics ranks a distant third in Korea behind Samsung Electronics and LG Electronics, its substantial sales in Europe and the US could appeal to overseas bidders.
Private equity groups could also be attracted by Daewoo Electronics’ cash-flow, although rigid Korean labour laws would prevent them from cutting costs by reducing the workforce.
However, some analysts doubted whether the company could fetch as much as $1bn. They argued that, with margins roughly half those of an industry leader like Samsung, buyers would have to believe in a steep rise in profits in the near future to justify such a valuation. ABN Amro declined to comment while PwC, Woori and Daewoo Electronics were unavailable.
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