Videocon's Daewoo bid rejected by creditors

The Videocon-led consortium's bid for Daewoo Electronics has finally been scrapped, according to Daewoo's creditors that have been trying to sell off the ailing electronics giant since November 2005.

Meanwhile, affiliates of Daewoo Electronics are preparing to throw their hat into the ring. An executive of Daewoo Electronics told newswire Dow Jones that former affiliates of the now-defunct Daewoo Group may suggest their own restructuring plan for Daewoo Electronics to Woori Bank.

A group of creditors, including Woori Bank and Korea Asset Management Corp (KAMCO), hold 97.5 per cent in the Korean electronics major.

According to reports, Daewoo's Korean creditors might be uncompromising even if the Videocon-led consortium came up with a revised offer. "If the Indian consortium comes up with an 'acceptable and reasonable' price for acquiring Daewoo Electronics, we will consider sitting at the negotiating table," Kim Young-Soup, a Woori Bank executive said.

"The creditors of Daewoo Electronics have decided to end the deal as we have failed to narrow the gap with the Videocon consortium in pricing and other terms," he said. The talks would not resume unless Videocon revised its price, said Woo Jong-Chul, a spokesman for Kamco.

The Videocon consortium that includes RHJ International, a part of US private equity fund Ripplewood Holdings, had initially bid $752 million to acquire a 97.5 per cent stake in the company.

However, during the due diligence process, the consortium asked for a 13 per cent discount on the final offer. Videocon offered to pay for the acquisition mainly by disposing of Daewoo Electronics' assets and by issuing a 15-year commercial paper, which was rejected by the creditors.

Venugopal N Dhoot, chairman, Videocon Industries, was unavailable for comment. According to sources, Dhoot is travelling till next week, in what is believed to be a last-ditch effort for salvaging the deal.

Daewoo Electronics has been run by creditors since the Daewoo conglomerate collapsed under $80 billion of debt in 1999.

The company has undergone a radical restructuring aimed at returning it to profit. Although it ranks a distant third in Korea behind Samsung Electronics and LG Electronics, Daewoo's substantial sales in Europe and the US make it appealing to overseas bidders.