SsangYong cars are displayed during the Brussels Motor Show on January 9, 2020 in Brussels.
(Photo : KENZO TRIBOUILLARD/AFP via Getty Images)
A major deal has transpired in South Korea to start the year with the country's bankruptcy court approving electric vehicle start-up Edison Motors Co.'s acquisition of struggling carmaker Ssangyong Motor Co., according to a report by the Korea Economic Daily newspaper.
Edison close to completing the Ssangyong deal
The next step for Edison is to submit its rehabilitation plan for Ssangyong by March 1 to South Korea's bankruptcy court to prove its capability in overcoming the troubled automaker's financial woes. Edison's blockbuster takeover deal will be finalized after the company pays out 274.3 billion won ($229.3 million) which is the remaining acquisition fee. Edison also needs to gain approval from at least two-thirds of Ssangyong's creditors to complete the deal.
This is just the latest chapter in the troubled history of Ssangyong, which has struggled to find its footing in the Korean automotive industry. Ssangyong had been in this situation before, facing near bankruptcy in 2011. Indian company Mahindra & Mahindra provided much-needed funds to rescue Ssangyong, acquiring a controlling 75 percent stake for the beleaguered carmaker.
The deal has not been profitable for Mahindra, with the Indian firm seeking to unload its stake in the South Korean company since June of 2020. Edison Motors came out of the blue last year with its bid to acquire Ssangyong, forming a consortium with Semisysco Co., activist fund Korea Corporate Government Improvement Fund (KCGI,) and Seoul-based Keystone Private Equity. They offered a bidding price worth 280 billion won.
Edison Motors eventually pushed its bid to 304.8 billion won, with the company offering to buy 60 million new Ssangyong shares at 5,000 won per piece. The two sides agreed to that contract, with Edison having a 95 percent stake in Ssangyong once the takeover is finalized. KCGI will get 34 to 49 percent of the new shares, while Edison will take control of the rest.
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Edison wants to be a major force in the EV market with Ssangyong
This is a major statement of intent by Edison Motors, established in 2015. The company currently produces electric buses and is developing electric-powered commercial vehicles. Edison founder and CEO Kang Young-Kwon wants a bigger share of the pie, with Ssangyong providing Edison a greater worldwide presence in the auto market via its affordable vehicle range.
Kang told the Korea Herald that Edison plans to invest between $670 million to $837 million to help the ailing Ssangyong. Edison is aggressive with its plans to infiltrate the lucrative passenger car market. The company is currently developing a powerful electric sedan named the Smart S and an SUV called the Smart X.
Ssangyong fits Edison's plans as the company is going electric in the future. They have already made available to customers the electric crossover of the Korando. The electric SUV e-Motion can be purchased for just under 20 million won thanks to tax benefits and government subsidies for environment-friendly cars.
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