'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.