By Kim Yeon-hee
SEOUL (Reuters) - Foreign investors wanting to buy South Korean companies are struggling to compete with powerful local conglomerates that use family ties and old business relationships to, in some cases, trump higher offer prices.
A decade after the Asia financial crisis, South Korea’s giant chaebol are now looking to buy back former units they had to sell at fire-sale prices at that time.
And while few see a return to the bad old days, where vast sections of the economy were constrained by weak management and inefficient cross-shareholdings, chaebol do appear to have the upper hand on a number of upcoming deals.
Former owners often have the ability to pay more because they can reap greater cost savings and efficiencies, but are not always required too.
Such was the case with Mando Corp, where private equity firms CCMP and Affinity agreed to sell their majority stake in unlisted auto parts maker to Halla Engineering %26amp; Construction (014790.KS: Quote, Profile, Research), which owned the company until 1999.
Halla beat out two other bidders — Kohlberg Kravis Roberts KKR.UL and TRW Automotive Holdings (TRW.N: Quote, Profile, Research) — even though its $690 million offer valued Mando at as much as a third less than the highest bid, Mando said.
Foreign investors have become reluctant to the preference sellers have for domestic investors and to face aggressive bidding from the conglomerates.
The sales of majority stakes in Daewoo Engineering %26amp; Construction (047040.KS: Quote, Profile, Research), bought by Kumho Asiana, and logistics firm Korea Express (000120.KS: Quote, Profile, Research), bought by the same business group, drew little of the expected interest from offshore buyers. Continued…
Tags: amp, business relationship, decade, family, family ties