'Chaebol' conglomerates on global shopping lists

'Chaebol' conglomerates on global shopping lists

By Frederic Garlan

SEOUL (AFP): South Korea's struggling "chaebol" conglomerates
need money desperately and their dire circumstances are
attracting a host of potential suitors from around the world.

South Korea's financial crisis represents a unique opportunity
for foreign businesses which still believe in the market here and
Western emissaries are now feverishly negotiating the purchase of
sections of the giant conglomerates.

"I have never seen (such) 'industrial tourism'," said Alain
Penicaut, Paris National Bank's general manager and CEO for
Korea.

"The Americans are in town as never before," he said.

Paralyzed by massive short-term debt, which has grown
insupportable after a crippling two-year slowdown, the chaebols
are now struggling for survival.

Ten of them are already on the brink of bankruptcy and others
are now ready to give up subsidiary businesses to salvage core
operations.

"Lots of businesses which don't have cash are ready to sell
subsidiaries, to release funds and save their core business,"
said a European diplomatic source.

French companies are generally less interested in South Korean
firms than those in America but Penicaut says he has been in
contact with two or three groups keen to see if there is anything
in chaebol portfolios they may be interested in buying.

Hanwha, the country's eighth biggest conglomerate, announced
Tuesday that talks were at an advanced stage with one of the
world's top seven oil companies for the sale of its refinery and
distribution operations. The company wants the sale to go ahead
to claw back 3,000 billion won (US$2.1 billion) from its total
estimated debt of 7,000 billion won.

Hanwha is negotiating with a knife at its throat -- its
bankers gave it an exceptional loan of 200 billion won on Monday
and the market is alive with rumors of a voluntary liquidation.
If agreement is reached, Royal Dutch-Shell, the choice of the
press as mystery buyer, will become number four in South Korea's
oil market which is currently completely closed to foreigners.

In October, another conglomerate in trouble, Ssangyong, sold
its paper napkins and diaper making business to Procter and
Gamble of the United States for $69 million, in the apparently
vain hope of salvaging its automobile production unit. Ssangyong
must decide by the end of the month whether to sell its
automobile subsidiary to its huge competitor Daewoo.

Foreign groups operating joint venture firms in South Korea
are at the forefront of those expected to make bids for chaebol
units.

"It's turning out well for European companies who generally
like to have total control over their foreign units," the
European source said.

The German chemical group BASF has already taken some stakes
from Hanwha in a joint venture run by the two firms for an
undisclosed price.

Penicaut says groups already bankrupt "died from megalomania,"
in other words diversifying too far from their core business.
For example, the underwear manufacturer Ssangbangwool owes its
failure to its heavy investments in the southwestern Muju ski
station. There is already one potential U.S. investor interested
in the business -- none other than pop superstar Michael Jackson
who has already paid the firm a visit.

In a similar story, biscuit-maker Haitai made unwise
diversifications in heavy machinery.

"It is vital that they go back to doing what they know how to
do," said Penicaut.

A particular attraction to foreign fixers who decide to gamble
on South Korea is that people here tend to buy quality goods.
If the chaebols do find professional managers with the skill to
overhaul business strategy they could quickly regain their former
glory.