Indian Firm to Buy Daewoo Electronics

Daewoo Electronics, the third biggest electronics company in Korea, will be sold to an Indian electronics firm.

The creditors’ board, including Woori Bank, announced the selection of Videocon, an Indian electronics company, and RHJ International Consortium, a subsidiary of an American Private Equity Fund, as the preferred bidders. A domestic Private Equity Fund, MBK, was selected as the preliminary bidder.

Some are raising voices of concern that this can lead to the leakage of the high electronics technology owned by domestic enterprises abroad.

The biggest electronics manufacturer in India, Videocon, brought the Braun screen TV division of the French firm Thomson and is continuing to carry out aggressive management.

Thomson is an electronics company which the former chairman of Daewoo Group Kim Woo-jung attempted to underwrite at only 1 franc through the liability assumption method but failed in 1996.

Daewoo Electronics was a symbol of the global management at that time, owning more than 100 manufacturing and sales corporations around the world.

The M&A negotiation between the two firms failed 10 years ago, but the designation of Videocon as the preferred bidder of Daewoo Electronics raised the possibility of the two companies boarding on the same boat.

The competition to underwrite Daewoo electronics took the tripartite structure composed of Videocon, the Malaysian firm Neo Equity Fund, and MBK Partners.

One official related to the creditors board said, “Neo Equity Fund came up with the highest bid for assumption, but did not win the trust of the creditors in their ability to raise budget and the willingness to buy."

It is known that the purchase price proposed by Videocon was around $700 million (about 665 billion won). The creditors board and Videocon Consortium will sign the MOU some time in September and sign the formal contract after two months of inspections. Videocon will take over a 100% share of Daewoo Electronics owned by the creditors such as Woori Bank and Korea Asset Management Corporation.

Leakage of New PDP TV, LCD TV Technologies?-

It is known in the electronics business circle that Daewoo Electronics has in its possession of high technologies in the fields of plasma display panels (PDP) TV, liquid crystal display (LCD) TVs, refrigerators, and washing machines.

Concerns are being raised in the business circle that Videocon will neglect the investment in the company after the takeover and will only focus on absorbing the high technologies and the business network abroad.

Some point out that Videocon, having secured sufficient production plants abroad, will only show interest in maintaining the worldwide sales routes owned by Daewoo Electronics.

"The controversy over the leakage of technology is inevitable because none of the domestic electronics companies were willing to buy Daewoo Electronics," says an official of this company. “The core issues left are raising new investment and guaranteeing employment."

jarrett@donga.com jaykim@donga.com