New Delhi, Oct. 23: A consortium led by Videocon Industries today signed an agreement to acquire South Korea’s ailing Daewoo Electronics for $731 million.

A pact was signed earlier between the consortium comprising Videocon, US-based equity fund Ripplewood and creditors Korea Asset Management Corporation and Woori Bank. Domestic creditors own 97.5 per cent of the unlisted firm. The acquisition price is, however, subject to change after a month-long review.

The deal is subject to various conditions, including the execution of definitive agreement, completion of due diligence, corporate approvals by the buyers and approval from the Korean authorities, including the Fair Trade Commission.

According to Venugopal Dhoot, chairman and managing director of the Videocon group of companies, financing the acquisition will not be a problem.

Videocon officials said the company has a strong balance sheet, which generates enough spare cash and indicated that it has also tied up financing for part of the acquisition deal.

Videocon was picked as the preferred bidder for the Korean company in early September. Daewoo Electronics is a part of the Daewoo group that collapsed in 1999 after being burdened under a $80-billion debt.

The company had expressed strong support for the proposed takeover last month, but appealed for greater investment. The acquisition is the “only realistic option” to save the firm, which is now in the seventh year of a debt workout programme, a Daewoo Electronics statement said.

“The reason for our active push for a merger and acquisition is the company’s desperate need for investment in technology development,” said Lee Seung-Chang, president of Daewoo Electronics.

“A new owner without any business investment coming along has no meaning. We want a bigger level of investment than done at present,” he said.

In a separate statement, the creditor financial institutions committee for Daewoo Electronics said, “The consortium was selected ... as an exclusive negotiation partner based on various factors, including financial capacity, complementarity of businesses and track record in various acquisitions and commitment to ongoing investments.”

For Videocon Industries, the deal will mark its third purchase in the last one year. It earlier bought Thompson’s global picture tube business for 240 million euros (about Rs 1,260 crore) and the loss-making Indian subsidiary of AB Electrolux, Sweden.

Videocon had taken over Electrolux Kelvinator India in a cashless transaction, where AB Electrolux agreed to subscribe to Videocon’s GDR worth about Rs 406 crore as part of the deal.

In home turf, however, Videocon faces stiff competition from other Korean firms such as LG and Samsung, who have together swept the Indian consumer electronics market over the last 7-8 years across all product categories.

On the impact that the acquisition may have on the Indian market, a Videocon official, who is on the board of the company, said, “For us this particular acquisition is not only to arrest sales in India, but to look at it from a global perspective.”

In India, Videocon Electronics claims to enjoy a 30 per cent market share, while LG and Samsung remain its top competitors.