News & Analysis

Morgan Stanley pulls out of Daewoo deal

Morgan Stanley Private Equity Asia has pulled out of its proposed acquisition of the Korean electronics manufacturer, reportedly over disputes with an electronics labour union. Ripplewood had previously agreed to pay $740m for Daewoo, but the deal also fell through.

-

Morgan Stanley Private Equity Asia, the Asian private equity arm of the US investment bank, has dropped its bid to acquire Korea’s Daewoo Electronics, formerly a unit of Daewoo Group, the erstwhile Korean conglomerate which collapsed in 1999.

Daewoo Electronics’ labour union had demanded three years’ job security, unnamed industry sources told Korean news website EDaily, Reuters reported.

A Morgan Stanley spokesman refused to comment as to why the firm pulled out of the acquisition process.

MSPE Asia was selected as the preferred bidder for the embattled electronics company in February this year following an auction process that began towards the end of last year. The proposed acquisition price was not disclosed. A final agreement was expected to be signed between Woori Bank, Daewoo’s main creditor, and MSPE Asia, in May.

This is not the first time that Daewoo Electronics has finalised a buyer but a deal has failed to materialise. In late 2006, a partnership comprising US buyout firm Ripplewood Holdings and Videocon Industries, an Indian consumer electronics company, had been selected as the preferred bidder for the Korean company for a consideration of about $740 million (€500 million).

However, that deal was scrapped last year because of disagreements over price.

MSPE Asia has historically been a very active investor in Korea. The firm has made seven investments in the country so far, and all but one of them have been majority investments. A few of its Korean investments include Landmark Investment Trust Company, an asset management firm which it sold to ING last year; Ssangyong Corporation, a trading company; and Hyundai Rotem, a joint venture with the Hyundai Motor Group, which manufactures engineering equipment, railway carriages and defence equipment and tanks.

The firm most recently entered into an agreeement with Norwegian newsprint producer Norske Skog to acquire its two Korean mills in partnership with Shinhan Private Equity for a sum of about $860 million. Shinhan Private Equity is a division of Shinhan Financial Group, Korea's second largest financial services conglomerate.