Contrary to the expectation that the acquisition will be financed by financing, SsangBall Group is expected to prepare to acquire Ssangyong Motor by increasing its equity capital. It is not that the shrimp will take over the whales, but that the shrimp will become whales and take over the whales. As for the method, it is known that a capital increase through a public offering for general shareholders is likely.
According to the investment banking (IB) industry on the 7th, SsangBall Group, such as Kwanglim, Nanos, IOK, BYC, and Mirae Industrial, is promoting financing through equity capital such as rights offering to acquire Ssangyong Motor. It does not raise debt capital such as acquisition finance, corporate bond issuance, or bank loans.
Procurement with equity capital is different from borrowing other people’s money like debt capital. There is no obligation to repay except in very special cases. no need to pay back
The method of solicitation is a general public offering of real power shares after shareholder allocation, the size of which is 450 billion won, and KB and Eugene Securities are the most likely organizers. If the general public offering of real power shares is held, it means that the securities company has actually secured a large amount of money to take over the balance. Kwanglim’s statement that “we have secured a stable financing channel for the acquisition of Ssangyong Motor” is also true.
If Ssangbull Group successfully raises its own capital, the criticism regarding ‘financial power’, which is currently being pointed out, is expected to decrease significantly. This is because raising equity capital is synonymous with accumulating the strength to invest new funds in the future.
In particular, it is differentiated from Edison Motors, which was the preferred bidder for Ssangyong Motor’s M&A last month. In the Edison Motors consortium, Edison Motors was a strategic investor (SI) and KCGI, called the ‘Strong Wealth Fund’, was a financial investor (FI).
Financial investors’ funds are equity capital according to Ssangyong Motor’s financial statements. However, under the assumption that the Edison Motors consortium established and acquired a special purpose company (hereinafter referred to as SPC), based on the SPC, senior and intermediate positions (at the time of investment) are subordinated investments and therefore have an obligation to repay. According to Chairman Kang Young-kwon’s Edison Group standards, most of the funds are ‘foreign capital’ that must be paid for such as interest expenses.
On the other hand, the Ssangbool Group is financed with equity capital. This will lead to improved financial stability. Since the financial position is stable, it is easy to create leverage. If you acquire an asset with the raised equity capital, you can borrow based on that asset.
In the M&A of Ssangyong Motor, the main variable is not only the repayment of revival bonds, but also the input of new funds such as R&D. This means that it is important to secure basic physical strength. After Ssangyong Motor was acquired by Daewoo Group in the 20th century, there were many twists and turns, such as going through a workout and attracting foreign capital. As time passed, the number of stakeholders naturally increased.
The automobile market is rapidly changing with electric vehicles and autonomous driving. To catch up with the trend, the investment is expected to exceed 1 trillion won. If the rights offering succeeds, Ssangbangbang Group will secure 855 billion won of cash equivalents (based on financial statements at the end of last year). It’s hard to dismiss it as a ‘shrimp’.
On the other hand, it is expected that it will take some time for the related official announcement. In case of public offering, the representative organizer will conduct due diligence. EcoproBM, which announced a capital increase of 500 billion won on the 5th, submitted a securities declaration regarding the capital increase after conducting due diligence for about 22 days from March 14.
© ‘Global Economic Daily in 5 Languages’ Ajou Economic Daily. Unauthorized reproduction and redistribution prohibited