Edison's takeover of SsangYong collapses

Industry

Published: 28 Mar. 2022, 18:15 Updated: 28 Mar. 2022, 19:27

Edison's takeover of SsangYong collapses

SsangYong Motor's acquisition deal by a local consortium led by Edison Motors fell through Monday. [NEWS1]

SsangYong Motor's attempt to find a new owner collapsed.

An acquisition by a local consortium led by Edison Motors fell through Monday after the Korean electric bus manufacturer did not pay up.

"A consortium led by Edison Motors did not pay the acquisition price by the deadline, which fell on March 25," SsangYong Motor said in a regulatory filing Monday.

"Based on the M&A contract, the deal has been automatically canceled."

Edison Motors said Monday it will file for an injunction to retain its position as the preferred bidder for SsangYong Motor.

Edison Motors had signed a contract to buy SsangYong Motor for 304.8 billion won ($249 million) early this year and paid 30.5 billion won as a down payment. It was supposed to pay the remaining 274.3 billion won by March 25.

SsangYong Motor said Monday it will look for a new buyer instead of continuing the deal with Edison.

"We plan to look for a new buyer and resubmit a new rehabilitation plan to the court," a spokesman for SsangYong Motor said.

SsangYong had submitted a rehabilitation plan to the court based on Edison paying the acquisition price.

SsangYong's creditors were supposed to review the plan and decide whether to approve it or not at a meeting scheduled for April 1.

Edison Motors had asked on March 18 for that meeting to be postponed, but SsangYong Motor declined.

"Edison Motors had already failed to pay the full amount of the acquisition price and we see it as only a waste of time to accept their request. It will only take away the opportunity for us to find a new buyer," the spokesman said.

Edison Motors' financial ability to acquire and run SsangYong Motor had been questioned, especially after Keystone Private Equity and Korea Corporate Governance Improvement, two major participants in the consortium, backed out from the deal.

Creditors and the labor union of SsangYong Motor were also opposing the acquisition. The creditors didn't like the low debt repayment ratio in the rehabilitation plan.

Edison Motors was only willing to repay 1.75 percent of SsangYong's 547 billion won worth of debt in cash. It wanted to convert the rest into equity, according to the rehabilitation plan.

“This shows how serious Edison Motors’ financial situation is,” the creditors said in a statement.

SsangYong Motor claims its business conditions have “greatly improved” compared to last year when it first started the M&A process and is hopeful a new buyer will appear.

“The new J100 model, the development of which was uncertain, will launch in June,” the company said.

“SsangYong’s transition to electric vehicle [EV] maker has also gotten more concrete by signing a strategic partnership with global EV maker BYD and we are planning on launching the all-electric U100 by the latter half of next year.”

The Korean automaker has been in court receivership since April 2021, after its biggest shareholder Mahindra & Mahindra failed to find new investors.

SsangYong Motor has been posting operating losses for 20 consecutive quarters since 2016.

If SsangYong Motor fails to find a new buyer by October, when its court receivership ends, the Korean automaker can go bankrupt and be liquidated.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]