Videocon's long wait to acquire South Korean appliance maker Daewoo Electronics is drawing to a close with a deal expected to be signed this week.
Sources close to the development confirmed that the Videocon-RHJ International consortium had agreed to pay Daewoo's creditors, including Korea Asset Management Corporation and Woori Bank, $700 million (around Rs 3,220 crore) for the ailing company. RHJ International is the holding company of the US buyout fund Ripplewood.
When contacted, Venugopal Dhoot, chairman, Videocon Industries, declined to comment, citing a non-disclosure agreement.
Earlier in September, the consortium had emerged as the preferred buyer for Daewoo Electronics. Creditor officials have said they want to sell Daewoo for more than $1 billion, taking into account its assets and business outlook.
Domestic creditors own 97.5 per cent of the unlisted firm. Daewoo posted losses in 2005, and Daewoo Chief Executive Lee Seung-Chang had said in September that he did not expect the company to post a profit for 2006, as it had not made sufficient investments.
Daewoo was placed under a debt rescheduling programme after its parent group went bankrupt in 1999 and has since streamlined its business to focus on televisions, air-conditioning units and refrigerators.
This acquisition gives Videocon access to the more mature markets where it would not have been easy for it to establish a presence on its own.
Daewoo has the largest share in the Polish TV market and has been leading the Vietnamese refrigerator segment for the last three years. It also has access to high-end technology for LCD and plasma televisions, which are fast replacing cathode-tube televisions in most countries.
Daewoo operates six plants in South Korea and 18 overseas units. Its assets totalled 1.65 trillion won ($1.7 billion) at the end of 2005.
The company had posted a net loss of 94 billion won in 2005 from a 30.4 billion won net profit in 2004, according to the company's audit report, as a stronger won put pressure on its export-led business. Sales for last year stood at 2.16 trillion won.
The acquisition fits into Videocon's strategy to grow its business internationally and domestically. In 2005, it acquired French firm Thomson SA's colour picture tube manufacturing business for $291 million, which was followed up with the Indian unit of Swedish firm Electrolux for $76 million.
