Fri, Apr 11, 2003 page10

• Sampo presses for more talks with Grundig

  SECOND CHANCE After Beko Elektronik dropped its plan to buy a majority stake in the German company, the local giant said it wants to reopen negotiations

  • By Bill Heaney / STAFF REPORTER
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  European electronics maker Grundig AG should come back to the negotiating table with Sampo Corp (聲寶), the CEO of Taiwan's largest consumer electronics maker said yesterday.

  "If Grundig is smart enough, they will come back to talk to Sampo," Chinese-language media quoted Sampo's Ho Heng-chun (何恆春) as saying yesterday. Sampo scrapped a deal to buy the ailing German manufacturer of TVs, stereos and car audio equipment last month when it could not secure funding from European banks.

  Ho's invitation comes as yet another deal to save Grundig fell through. On Monday, a leading Turkish consumer electronics company, Beko Elektronik AS, dropped its plan to buy a majority stake in Grundig.

  "The risks presented by the current economic climate played a major part in the investor's decision," Grundig said in a statement.

  Sampo's January offer to pay nearly US$100 million to buy the 58-year-old Nuremberg-based brand name saved Grundig from bankruptcy when banks extended additional credit on the strength of the offer.

  The deal, however, fell through in early March when banks in Europe refused to underwrite a loan of US$430 million for the purchase of the newly acquired company. Compounding the deal's conclusion was Sampo's refusal to pay US$218 million for Grundig's pension liabilities as well as an outstanding US$48 million loan for capital equipment, Financial Times Deutschland reported in March.

  The sticking point for any negotiations appears to remain with creditor banks in Europe, Sampo's spokesperson said.

  "In the final stages of our discussions we came to an agreement on the pension and capital expenditure liabilities, but there were still problems with the level of royalties expected from the German banks," Kanty Wu (吳錦芳) said.

  If Grundig can work out a deal with the banks, Sampo is ready to resume its buy-out plan, Wu said.

  The latest failure to find an investor has sent Grundig scrambling to select a new front man. Accountant and insolvency lawyer Eberhard Braun joined the board of directors Tuesday as spokesman after chairman Hans-Peter Kohlhammer was booted off the board, the company said in a statement.

  "Dr. Braun has many years of experience in similar corporate situations," the statement said. "This will be called on in the forthcoming structural reorganization."

  The statement also claimed there were other possibilities for investment.

  The new board of directors aims to hang on to "the technological core of the company and its important subsidiaries" to keep operating, the statement said. Grundig now appears to be preparing for a "self-governing insolvency," Financial Times Deutschland reported yesterday.

  "I'm assuming that insolvency can no longer be avoided," Grundig board member Thomas Schwarz was quoted as saying yesterday.

  Four creditor banks, including Deutsche Bank, Dresdner Bank, Bayerische Landesbank (Bavarian State Bank) and the Bavarian State Foundation for Structural Financing, are expected to terminate the line of credit, the report said.

  Since Sampo's bid in January to purchase a controlling stake in Grunding, analysts have said that acquiring the trusted brand name will help Sampo expand its sales internationally.

  "When entering a new market, branding and distribution are difficult barriers, especially in Europe, where consumer behavior is quite different from Asia," Chen Yen-liang (陳彥良), an analyst at Yuanta Core Pacific Securities Co (元大京華證券) in Taipei, said when Sampo first made the offer in January.

  The branding shortcut allows Sampo to enter not only Europe but also the global market, Chen said.

  "Market expansion is important for Sampo's survival, since the domestic market is limited and competition continues to grow after Taiwan's WTO entry," Chen said.

  Grundig's press contact Holm Kilbert was unavailable for comment "due to the stresses of the current situation," a source at the Nuremberg headquarters said yesterday.
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