Mumbai, Dec. 26: Videocon Industries’ plan to acquire Daewoo Electronics appears to have run into trouble.
Creditors of the South Korean company have apparently rejected a proposal submitted by the consortium led by the Dhoots to pare the original price for the buyout.
In September, 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.
Soon after, differences are believed to have cropped up between the consortium led by Videocon and Daewoo's creditors over price and other terms of the deal. The Videocon group wanted to bring down the purchase price by 13 to 20 per cent from its original bid, while some creditors were willing to limit the reduction only to 5 per cent.
Reports now coming from South Korea say that while creditors have stuck to their stand, they are not inclined to accept certain “conditions” stipulated by the Videocon consortium. The creditors are expected to meet this week to take a decision on the issue.
In the event that more than 75 per cent of Daewoo Electronics’ creditors do not agree to the Videocon price proposal, the selling process may be halted.
Videocon chairman Venugopal Dhoot was, however, not available for comment. When Videocon and its consortium was picked by Daewoo Electronics’ creditors, it was billed as the highest ever bid made by an Indian company to acquire an overseas company. It had then pipped Tata Tea’s buyout of American energy drink giant Glaceau for $677 million. It was expected that the acquisition would enable Videocon to consolidate its position further in overseas markets, apart from creating synergies among the two home-appliances makers.
The bid marked Videocon's third major global attempt in less than two years after it took over French firm Thomson SA and the Indian operations of Electrolux. The Thomson SA acquisition included its global colour picture-tube manufacturing business, including units in China, Poland, and Mexico and it followed Videocon's earlier agreement to buy its Italian tube factory. The combined capacity of the units was around 1.9 crore units of colour picture-tubes and 40 lakh pieces of colour picture-tube glass a year.
Under the terms of the deal with Electrolux entered in July last year, the Videocon group acquired the entire shareholding of AB Electrolux (ABE) in Electrolux Kelvinator Ltd (EKL). The acquisition gave Videocon a control of EKL’s three facilities in India.
Videocon was in the news again, earlier this month, when reports said it has also bid for Hong Kong-based LG Philips Displays (LGPD), a leading manufacturer of cathode ray tubes (CRT), which are used as picture tube in TV sets. The company is a joint venture between Dutch major Philips and South Korean LG Electronics and has operations in China, Indonesia, Korea and Brazil. Some of its facilities in other developed nations were earlier shut down. The bid came as Videocon wants to garner 50 per cent of the global CRT market and it also came as part of its strategy to acquire troubled assets at reasonable prices and later turn them around.
The $2.5-billion Videocon group operates through four sectors that include consumer durables, oil & gas, colour picture tube glass and CRT.
While the Thomson acquisition made it one of the largest colour picture tube manufacturers in the world, it is also one of the largest colour picture tube glass manufacturers globally.
In oil and gas, the group has its Ravva oil field which produces 50,000 barrels of oil per day. The group has plans to venture into overseas as well.