Reuters reports that South Korea’s Daewoo Electronics have rejected a demand by Sweden’s Electrolux to cut the sale price by above 5 percent and will consider restarting the sale process, say sources, in a move that puts the deal in danger of falling apart, again.
“Lead creditor (Woori Bank) said in a letter to Electrolux that it cannot accept the demand…and the only alternative is to start off with a clean slate,” a source told Reuters. The sources requested anonymity due to the sensitivity of the situation.
Years of attempts to sell the unlisted Korean home appliance maker, including the latest $513 million deal with Iran’s Entekhab Industrial Group, have failed. The legal action by Iran’s Entekhab (the previous buyer) is a burden for creditors seeking to move sale talks with Electrolux ahead, the source added as a holding company of Entekhab have filed an injunction preventing creditors from cancelling it’s takeover bid.
Reserve bidder Electrolux, believed to have offered around 600 billion won (£348.8 million) in a bidding war with Entekhab, told the creditors that it was willing to start sale negotiations, the sources said.
The loss-making firm has drawn little interest among Korean companies, with its product line-up of refrigerators, washers and televisions not seen as competitive against low-priced Chinese producers and bigger local rivals such as Samsung Electronics and LG Electronics .
Since 2006 a series of talks to sell Daewoo fell through with Ripplewood Holdings, a private equity unit of Morgan Stanley , and a consortium of India’s Videocon Industries and RJH International .
Daewoo posted a consolidated net loss of 64.6 billion won (£38.4 million) last year, compared to a net loss of 185.3 billion won (£110 million) in 2009.
The thing is, who else is going to bid for Daewoo?
If the creditors want any hope of getting anything back on the deal then the Electrolux bid is (probably) the best offer that they’re likely to get in the current climate and for the next couple of years as nobody else probably has both the cash and inclination to buy the business. Even considering any potential settlement with Entekhab the creditors may be best to just get shot of the business as soon as they can, lick their wounds and move on.