Hard to get

Mumbai, Jan. 5: Creditors of Daewoo Electronics have decided to abandon their sale of the troubled South Korean company to a consortium of investors led by Videocon Industries after the two sides bickered over a price revision following a due diligence exercise that preceded the buyout.

The trouble between Daewoo creditors and Videocon was first reported by The Telegraph on December 27.

Videocon International had earlier demanded a 13 per cent cut on the original purchase bid of $730 million for South Korea’s third-largest electronics company. It later decided to settle for a less than 10 per cent reduction in the offer price in a bid to bring about a settlement and thus win the company.

However, creditors of the ailing Korean firm are believed to have rejected this fresh offer as well. According to Xinhua finance news agency, Woori Bank, the largest creditor to Daewoo, said the bank along with other creditors has decided to abandon the plan to sell the company to the consortium.

“We creditors have found that the revised offer by Videocon is still unacceptable and thus we are in the process of notifying the Indian company that the memorandum of understanding signed earlier is dropped and they lost their status as preferred bidder,” a Woori Bank spokesperson said in Seoul.

Videocon chairman and managing director Venugopal Dhoot was not available for comment. However, sources close to the company said they continue to remain hopeful of clinching the deal as creditors to Daewoo Electronics are still open to talks with the company. Videocon is still being seen as the only contender.

Last year, Videocon Industries was picked as the preferred bidder to take over Daewoo Electronics for a price of around $730 million. Woori Bank, one of Daewoo’s leading creditors, had named Videocon and RHJ International, the holding company of US buyout fund Ripplewood, as the primary bidder. Daewoo Electronics was a unit of the Daewoo Group, which collapsed in 1999 under debts that came to $80 billion.

However, the bickering over the deal began soon after. Videocon and its consortium came to the conclusion after conducting a due diligence exercise that they were paying a higher price for the transaction. They had initially asked for a 13 per cent cut in the deal value even as they asked creditors to reinvest the money in convertible bonds. The consortium later revised the cut to 10 per cent after strong opposition from the over 40 creditors to Daewoo Electronics.