Blue Star pushes aheadon Ssangyong purchase

KOREAN CARS: Though still awaiting approval from the Chinese government, the Beijing-based chemicals maker is offering to pay US$1.5bn for the South Korean carmaker


Tue, Dec 23, 2003 - Page 11

China Blue Star Group Co said it will start talks to buy South Korea's Ssangyong Motor Co for US$1.5 billion, even before gaining approval from the Chinese government for the takeover of South Korea's fourth-biggest carmaker.

The Beijing-based maker of chemicals and cars, which signed a memorandum of understanding in Seoul with Chohung Bank and 27 creditors of Ssangyong's parent to negotiate the purchase, said it plans to import as many as 200,000 of the South Korean company's sports-utility vehicles every year for sale in China. Blue Star said it expects to get written approvals for its takeover by late January.

"Blue Star and the creditors believe they can win over the Chinese government while negotiations go on," said Chung Doo-sun, a fund manager at CJ Investment Trust Management Co in Seoul.

A successful takeover of the producer of Rexton and Korando sports-utility vehicles would make Blue Star the first Chinese carmaker to buy an overseas rival, beating an offer from Shanghai Automotive Industry Corp, China's biggest vehicle maker, for Ssangyong. Blue Star declined to give a schedule for concluding its negotiations to buy 55.4 percent of Ssangyong.

Blue Star and Shanghai Auto, both state-owned, need Chinese government permission to buy assets abroad. Approvals are required from China's commerce ministry, the State Development and Reform Commission, as well as the State-Owned Assets Administration and Supervision Commission, according to government rules.

Ssangyong Motor was put up for sale after its parent company, Daewoo Group, collapsed in 1999 under US$80 billion of debt. The vehicle assembler employs 7,400 workers at its factory in Gyeonggi province, south of Seoul.

Blue Star has offered to pay a total of US$1.5 billion to buy Ssangyong and help it expand. That includes US$500 million for 55.4 percent of Ssangyong, US$700 million for expansion in South Korea and US$300 million for building a sales network in China, according to Blue Star and Chohung Bank.

Chinese banks, including Bank of China, the country's biggest foreign currency lender, were interested in lending money to Blue Star to finance its takeover of Ssangyong, the Chinese company's vice president Liu Xianqiu said in Seoul, after signing an agreement to commence talks with Chohung Bank.

Blue Star was picked last week as the preferred buyer of Ssangyong by Samil Accounting Corp, the adviser for and arranger of the Ssangyong sale.

In October, China's State Development and Reform Commission urged Chinese carmakers to go slowly in new investing over concerns of excess production.

Shanghai Auto, which makes cars with General Motors Corp. and Volkswagen AG, said in separate statements last week and today that China's government had approved it as the sole Chinese company authorized to bid for Ssangyong.

"The Commission has agreed for Shanghai Auto to work with a partner to buy Ssangyong," Xue said in a statement.

"The approval lets us use Ssangyong's brand, technology and research capabilities in China." The company has "no plans as yet" to work with Blue Star in buying Ssangyong, he said.

An official at the Reform Commission in Beijing, speaking on condition of anonymity, confirmed that Shanghai Auto was the sole authorized company to bid for Ssangyong.

"We wouldn't be here if we weren't going to get the go-ahead from the Chinese authorities," said Blue Star's Liu. The company was "in the process of getting the written approval and will get all the paperwork in place by late January," he said.