Videocon Industries’ ambitious $730 million attempt to take over Daewoo Electronics fell apart on Saturday as creditors led by South Korea’s Woori Bank formally decided to scrap the deal, but the consortium led by Videocon’s Dhoots started a fresh round of negotiations for a revised offer.
The deal has faced bumps over pricing after being stitched up last October. "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," Kim Young-soup, a Woori Bank official, told the Associated Press news agency in Seoul.
Videocon’s Chairman and Managing Director, Venugopal Dhoot was unavailable for comments in India, but the Press Trust of India (PTI), citing industry sources, said the consortium comprising Videocon and US equity firm Ripplewood had scaled back the demand for a price cut to 10 per cent from an earlier 13 per cent.
Investment banking sources said that Videocon had asked for a 10% cut in price after it completed the due-diligence of Daewoo. "You make the offer on certain assumptions. Due-diligence will give the real picture. Videocon has asked for a price cut after it made a detailed analysis of the company," said a Mumbai-based investment banker.
"After being selected as the prefered bidder, Videocon realised that it will have to spend more time and money to restructure the operations of Daewoo and it was justified in asking for a downward price revision when there are not many takers for Daewoo," said Sumeet Budhraja, an analyst at Edelweiss Securities.
Daewoo Electronics, South Korea's third-largest electronics goods maker by sales, has been under a creditor-led debt-rescheduling program since 2000 after amassing huge debts.
The Videocon-led consortium agreed last October to buy 97.6 per cent of Daewoo for 700 billion won. Two months later, it demanded a 13 per cent cut.
Creditors, including Woori Bank and Korea Asset Management Corp, or Kamco, who collectively own the 97.6 per cent in Daewoo, have been seeking to sell the controlling stake since November 2005.