Corporations for Sale are too Expensive

A second fierce merger and acquisition battle has begun.

Several large corporations, whose scale is large enough to change the territory of the business industry, are for sale. Painstaking efforts of restructuring brought about fruitful results, so the companies are healthier.

The problem is to find a quality candidate, which is difficult. This is because the price of these corporations on sale has soared, and there are also movements to restrict the qualifications of candidates, such as preferences of the local capital.

With approximately 20 huge offerings, including former Daewoo, Ssangyong, Hyundai affiliates and bank and credit card companies, expected to be available from late this year, a merger and acquisition market of 50 trillion won will exist, according to the financial and industrial world on September 13.

Most of the former Daewoo affiliates, including Daewoo Precision Industries and Daewoo Engineering and Construction, are already under the process for sale within this year.

The list of those looking for a new owner includes former Ssangyong affiliates, such as Ssangyong Engineering and Construction and Ssangyong Corporation, and Hyundai affiliates, such as Hyundai Engineering and Construction, Hyundai Autonet, and Hynix Semiconductor.

However, their skyrocketed prices have made potential buyers hesitant.

“We were pretty sure of being nominated as the prior candidate for negotiation when we suggested 1.5 trillion won. But later we were so surprised to learn that SK suggested three trillion won,” said an official of Mirae Asset which had formed a consortium to bid for the Inchon Oil Refinery. The person added that the firm has decided to rather look for other corporations overseas.

Critics also point out to the problem of ‘public trial’ that the government, economic circles, and politicians create before the bid since they make noises about which buyer is acceptable or not.

In particular, foreign capital that the government had strongly promoted to attract for itself a few years ago have been so excluded that complaints of reverse discrimination have become quite common.

Lonestar, the U.S. private equity fund pursuing Chonggu Corporation under legal management, applied for a provisional disposition to prohibit re-bidding as the court had ordered a re-bidding of Chonggu after the GB Synerworks Consortium, the previous negotiator, had failed to pay a deposit.

The creditors said that the sale is to retrieve the public fund invested in insolvent companies. “Right after the financial crisis, the nature of sales was usually focused on selling itself regardless of the price in order to enhance the international credit rating. But, nowadays, the scale and nature of the sale are totally different so we plan to sell them at a proper price,” said an official from the creditors.

Suk-Min Hong smhong@donga.com sublime@donga.com