Videocon may agree to a less than 10% cut in bid price for Daewoo Electronics; budges from earlier demand of a 15% cut

Controversy seems to be seeping into the deal involving the Videocon-Ripplewood combine and Daewoo Electronics. After proving to be the final bidder for Daewoo for $730-750 mn, Videocon had demanded a cut of 15% in the bid price. However, the 40 banks controlling Daewoo Electronics, which has been under a creditor-led debt-restructuring programme since 2000, after its insolvent parent Daewoo Group was put under the workout programme post its collapse under a $80 bn debt, have vetoed the issue.

Videocon is worried about losing out on a global deal, which would bring with it tremendous capabilities in terms of scale and distribution. Also, Daewoo’s creditors are understood to be under pressure from locals for selling the plant to a foreign hand; the Koreans have opposed Videocon’s bid following concerns of technology leaks and opposition over the migration of technology to Korea’s potential rival, India. Accordingly, Videocon has decided to settle for a less than 10% cut in the offer price. Videocon is now willing to settle for the ‘best possible business terms’ for both parties, rather than lose out on the deal. If both parties come to a consensus, the final deal is likely to be signed after another month’s delay. The deal was earlier supposed to be signed sometime in December last year.

Daewoo is estimated to have global sales of about $2.5bn, whereas Videocon Industries’ consumer electronics business is currently generating revenues of about $1.5 bn. The Videocon-led consortium emerged as the preferred bidder to buy a controlling 97.6% stake in Daewoo Electronics.

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