U.S. firm, 8 others submit LOIs for SsangYong Motor

 A U.S. vehicle importer and eight other companies have submitted letters of intent to acquire SsangYong Motor Co., SsangYong said Friday.

U.S.-based Cardinal One Motors, SM Group and Edison Motors Co. confirmed they joined the race to acquire the financially troubled carmaker to expand their business portfolios.

K-pop Motors Co., which mainly produces electric scooters, and pharmaceutical firm Park Seok-jeon & Co. reportedly submitted LOIs. In April, the two companies formed a strategic partnership to acquire SsangYong. They could not be reached for comment.

SsangYong did not provide names of the nine companies, citing the confidentiality agreement with the potential investors.

U.S. businessman Duke Hale, chief of Cardinal One Motors, founded HAAH Automotive Holdings Inc. seven years ago to import vehicles from China for U.S. sales and tried to acquire SsangYong through the business entity.

But HAAH recently filed for bankruptcy due to rising U.S.-China tensions and the former HAAH chairman said he set up Cardinal One Motors to push ahead with the plan to acquire SsangYong.

“All the assets we bring to SsangYong, particularly our depth of auto experience, can help in the rehabilitation in Korea and expand sales through North America to (attain) SsangYong’s highest achievement in its history,” Hale told Yonhap News Agency via email.

The number of direct SsangYong jobs and indirect jobs should grow since our plan will more than double SsangYong’s volume in three years, he said.

This file photo provided by SsangYong Motor shows the New Rexton Sports SUV. (PHOTO NOT FOR SALE) (Yonhap)

The company said another homegrown equity fund, the Korea Corporate Governance Improvement (KCGI), may participate in the consortium.

SM Group said Friday it has an interest in taking over SsangYong to diversify its business portfolio, which ranges from construction to shipping and auto parts manufacturing.

“Most of the companies that have submitted LOIs have plans to invest in electric vehicles and it will help SsangYong transform itself into an environment-friendly carmaker,” SsangYong said.

The SUV-focused carmaker and its lead manager EY Hanyoung accounting firm plan to conduct preliminary due diligence on the companies that pass an initial screening process by the end of August. They aim to select a preferred bidder in September.

Analysts said it will take 800 billion won to 1 trillion won (US$700 million-$870 million) to take over the debt-laden SsangYong.

SsangYong’s Indian parent, Mahindra & Mahindra Ltd., had been in talks with HAAH to sell its majority stake in the Korean unit since last year as part of its global reorganization plan amid the COVID-19 pandemic.

HAAH was expected to submit its LOI to the Seoul Bankruptcy Court by March, but it did not send the documents, raising doubts about its intention to invest in SsangYong.

As for the failure to submit an LOI, Hale said the company needed more time to look into SsangYong’s financial details before making an investment decision.

In April, SsangYong was placed under court receivership for the second time after undergoing the same process a decade earlier.

Court receivership is one step short of bankruptcy in South Korea’s legal system. In receivership, the court will decide whether and how to revive the company.

China-based SAIC Motor Corp. acquired a 51 percent stake in SsangYong in 2004 but relinquished its control of the carmaker in 2009 in the wake of the 2008-09 global financial crisis.

In 2011, Mahindra acquired a 70 percent stake in SsangYong for 523 billion won and now holds a 74.65 percent stake in the SUV-focused carmaker.

KPMG Samjong Accounting Corp., the auditor of SsangYong, declined to give its opinion on the carmaker’s annual financial statements for the year 2020.

SsangYong could be delisted if its accounting firm again refuses to offer an opinion on the company’s annual performance for the following year after the one-year period.

From January to June, SsangYong sold a total of 40,134 vehicles, down 19 percent from 49,387 units a year earlier. Its lineup consists of the Tivoli, Korando, Rexton and Rexton Sports SUVs.

In self-help measures, SsangYong’s 4,700 employees began to take two-year unpaid leave in rotation on July 12 while accepting an extension of a cut in wages and suspended welfare benefits until June 2023.

The company also plans to sell its current Pyeongtaek plant, 70 kilometers south of Seoul, in three to five years, and it will build a new factory to focus on electric vehicles in the same city.