Korean sources indicate that Dongbu Daewoo Electronics is looking for a new owner that is highly likely to be a foreign company.
According to reports in the Korean press a few foreign businesses have shown interest in taking over management rights of the Korean company that is struggling to make a profit, and some meaningful deal may be reached this month.
One of the likely foreign buyers is Qingdao-based Aucma, a Chinese electronics company that is reported to have made attempts to acquire a total of 46% stake in the Daewoo, but progress has been slow due to unknown reasons.
“Since the Chinese company is a state-backed business, the approval process seems to be taking some time,” a source said. “Because it is quite a competitive company with outstanding refrigerating technologies in the Chinese electronics market, marriage with Dongbu Daewoo may create some synergy for both.”
Formerly known as Daewoo Electronics, the company was acquired by Dongbu Group in 2013 after experiencing liquidity problems in the late 1990s, and has tried to focus on small niche markets that are often missed out by larger premium players.
Dongbu Group is now seeking to sell the 46 percent stake in the electronics unit with management rights because it has nearly failed to meet requirements imposed by its financial investors in exchange for 135.6 billion won ($120.6 million) worth financial aid in 2013.
One of the requirements was to have the electronics business go public on the stock market by 2018, but an initial public offering is considered a tough challenge for Dongbu Daewoo considering its drastically slashed operating profit from 9.5 billion in 2015 to 1.9 billion last year.
As a result, the company’s net asset value plunged from 180 billion won to around 160 billion won.
If the company fails to go public, it must pay 8% interest to the investors for the borrowed fund.
“Due to the burdensome requirements, we are in the process of finding a new investor,” a company official said. “China’s Aucma is a possible candidate with some positive prospects.”
However, because the company’s products are priced in the mid-range, profit margins are low compared to premium electronics makers like Samsung and LG.
“Since the company is heavily dependent on exports, changes in foreign exchange rates affected last year’s profit significantly, largely due to some uncertainties stemmed from political issues,” said a company spokesman.
Of course a while back we reported that Electrolux was looking to buy the Daewoo business but that all seemed to fall through but, who knows, maybe the business will get split up and various parts of it hived off allowing appliance makers to bid for the appliance side of the business.
That would make sense as Daewoo, being a "budget" brand has more penetration into emerging markets where many are looking to expand into.