The Hindu Business Line : Videocon to start fresh talks with Daewoo creditors

Videocon Industries-led consortium is preparing to start fresh negotiations with the creditors of Daewoo Electronics for acquiring the Korean company, after the deal between the two, concluded in October last year, fell through over subsequent differences on the negotiated price.

The October deal came apart after the creditors of Daewoo rejected Videocon's proposal for a 13 per cent discount on the negotiated acquisition price of about $750 million (about Rs 3,200 crore).

With both the sides not closing the window for fresh negotiations, sources tracking the deal say that the development may not signal the end of Videocon's attempts at taking over the debt-ridden Korean electronics firm.

Videocon, in partnership with a fund headed by Ripplewood Holdings, still continues to be the most likely buyer, one of Daewoo's creditors is reported to have said in a statement.

It would depend on how much ground the two sides are willing to yield on the price.

Foreign wire agencies quoted Woori Bank, one of Daewoo's creditors, as saying that "October's preliminary agreement to sell Daewoo to Videocon and its bidding partner is annulled."

The MoU was signed on October 20 between the Videocon-consortium and creditors of Daewoo, including Woori Bank and Korea Asset Management Corp.

The creditors hold 97.6 per cent stake in Daewoo, after it came under a debt-restructuring programme, following its insolvent parent, Daewoo Group, being kept under a workout.

The creditors have been seeking to sell their controlling stake in the Korean outfit since November 2005.

This was to be Videocon's third major acquisition in the last one year, after it took over Thompson's global picture tube business for about Rs 1,260 crore and Electrolux Kelvinator India, the Indian subsidiary of A.B. Electrolux of Sweden. Daewoo has manufacturing facilities in Poland, Mexico, Spain, Vietnam, and China, apart from Korea.

Immediately after signing the MoU, Mr Venugopal Dhoot, Videocon Chairman, had told Business Line that the Daewoo acquisition would bring about significant synergies, with the Korean firm having a products portfolio that includes microwave ovens, air-conditioners, motors, vacuum cleaners and compressors. He said the deal would help Videocon enlarge its own products basket, while gaining access to new overseas markets.

Videocon Industries is currently sitting on cash surpluses of about $300 million, which could be leveraged to fund the acquisition. "In a sense, the cash flows of the oil business of the company was to complement the cash needs of the acquisitions in the high-volume consumer electronics business," an analyst said.

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