Ssangyong Motor Seeks New Owner... Edison Predicts Legal Battle (Comprehensive Report 2)

Failed Funding Causes Collapse... "Plan to Resell After Increasing Value"
Industry Outlook Pessimistic
Edison "Will File Injunction to Suspend Contract Termination"

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Hyun-seok] Edison Motors Consortium's acquisition of Ssangyong Motor has ultimately fallen through. The miraculous merger and acquisition (M&A) where a shrimp embraces a whale did not happen. The failure to secure funding, which raised many doubts from the start of the acquisition battle, was the cause of the collapse. Although the company plans to proceed with a resale process, there are forecasts that finding a new owner will not be easy, as major companies did not participate in the final bidding during the previous acquisition process.

On the 28th, Ssangyong Motor announced that it would terminate the M&A investment contract with Edison Motors Consortium. The contract was automatically canceled because Edison Motors failed to pay the acquisition price within the deadline.

Previously, the Edison Consortium was required to pay the remaining 274.3 billion KRW, excluding the 30.5 billion KRW deposit paid by the 25th of this month. This is because the scheduled meeting of stakeholders is on the 1st of next month, and the full acquisition payment must be made at least five business days before the meeting date.

Throughout the acquisition process, there were continuous conflicts between Ssangyong Motor and Edison Motors. The trade creditors' group, composed of Ssangyong's partner companies, requested the court to replace the acquirer because the repayment rate proposed by Edison Motors was excessively low. The labor union also submitted an opposition to the court, stating that the repayment rate proposed by Edison Motors was too low and that their technological capabilities could not be trusted.

[Image source=Yonhap News]

From the market's perspective, doubts about Edison Consortium's ability to secure funding were raised even before the acquisition began. Edison Consortium planned to raise acquisition funds by attracting financial investors (FI). However, Keystone PE, initially an FI, withdrew from the consortium, and although KCGI did not officially announce its withdrawal, it failed to finalize investment methods such as securing Ssangyong shares or lending funds, causing the plan to falter. Professor Kim Pil-su of Daelim University’s Department of Automotive Engineering explained, "Ultimately, you need to have a lot of your own capital, and proceeding with someone else's capital is not easy. You need to build trust with creditors and labor unions, but distrust has accumulated to the point that everyone opposes it."

Senior Research Fellow Lee Hang-gu of the Korea Automotive Technology Institute said, "The decisive reason seems to be the failure to secure funds," adding, "It appears that losing trust from Ssangyong and its partner companies also had an impact."

Ssangyong Motor intends to seek a new acquirer and proceed with resale. The company emphasized that its condition has improved since the start of last year's M&A and expressed confidence in the resale. The development of the successor model to the Musso, ‘J100,’ which was uncertain, has been completed and is scheduled for release at the end of June. The semi-knocked down (CKD) project with Saudi Arabia's SNAM also saw the local factory break ground in January. They secured an export volume of 30,000 units annually starting in 2023. A company official explained, "There are still about 13,000 units that have not been delivered yet," adding, "If supply issues with semiconductors and other parts are resolved, the production line is expected to operate in two shifts, normalizing company operations."

The creditors are also eager to find a new acquirer quickly. A creditor representative said, "We plan to find an acquirer with financial strength and technological capability after increasing the company's value."

However, industry outlook on the resale is pessimistic. During last year's Ssangyong Motor sale process, groups like SM Group emerged as potential acquirers but ultimately did not participate in the final bidding. If this happens again, the court may terminate the rehabilitation process and proceed with liquidation.

Experts predict that the failure of Ssangyong Motor's acquisition will become a significant burden for the new government. Senior Research Fellow Lee Hang-gu said, "The previous government made every effort but ultimately failed," adding, "This will likely be the first test for the next government's industrial policy, and it is not an easy problem to solve."

Professor Kim Pil-su of the Department of Automotive Engineering also expressed concern, saying, "There is no reason to acquire Ssangyong Motor, which lacks future growth engines," and "This can be seen as the biggest bomb the new government has inherited."

Meanwhile, Edison Motors plans to file for a provisional injunction to preserve its status regarding the termination of the contract with Ssangyong Motor. An Edison Motors official said, "The court requested that the application for corporate merger changes be submitted by the 29th," adding, "Ssangyong's administrator notifying contract termination disregards the procedures and regulations of the management court."

They also plan to proceed with a provisional injunction to suspend the effect of the contract termination. The official emphasized, "We will request the replacement of Administrator Jeong Yong-won, who unilaterally notified the contract termination, ignoring the procedures and regulations of the management court," and "We plan to file for a provisional injunction to preserve the contract status and a provisional seizure on the contract performance guarantee deposit."

This content was produced with the assistance of AI translation services.