SsangYong Motor's headquarters in Pyeongtaek, Gyeonggi Province / Courtesy of SsangYong Motor

By Baek Byung-yeul

Edison Motors' acquisition of SsangYong Motor is on the verge of collapse, as it has failed to pay the balance in the purchase price for the debt-ridden carmaker before the deadline, according to company officials and industry analysts, Sunday.

A consortium led by Edison Motors was supposed to pay 274.3 billion won ($223.8 million) to acquire SsangYong Motor by March 25. The Seoul Bankruptcy Court ordered Edison Motors to pay the full balance by that day, five business days before the creditors' meeting on April 1.

At the meeting, creditors and others related to the acquisition process are set to decide on a rehabilitation plan for SsangYong Motor. However, since Edison Motors did not pay for the acquisition within the set period, the meeting cannot be held.

An industry official familiar with the matter said, "SsangYong now has the authority to terminate the M&A contract signed with Edison Motors because the latter didn't pay the remaining acquisition price." Edison Motors already paid 30.5 billion won to SsangYong Motor, about 10 percent of the total acquisition amount.

"If SsangYong Motor decides to terminate the contract, Edison Motors' acquisition plan will be scrapped," the official said, asking for anonymity. Stating that Edison Motors applied to the Seoul Bankruptcy Court to postpone the payment period, he added that it remains to be seen whether the court would accept the request.

SsangYong filed for court receivership in December 2020, as the company failed to repay around 160 billion won worth of loans and its Indian owner, Mahindra & Mahindra, put SsangYong up for sale. In November 2021, Edison Motors and SsangYong signed a memorandum of understanding for the purchase and the Seoul Bankruptcy Court approved the Edison-led consortium to take over SsangYong in January.

Initially, Edison planned to attract financial investors to raise funds, but the company has been struggling with securing enough funds for the acquisition. Keystone Private Equity, a local private equity fund, already withdrew from the consortium, and another private equity fund, member KCGI, also has not confirmed its investment plans concerning the acquisition.

At this time when Edison Motors is having difficulties in securing funds, creditors and Ssangyong's union are opposing Edison's acquisition plan. The creditors recently made an announcement saying, "Edison Motors' funding capabilities and business plans are unreliable." They also added, "We ask for additional mergers and acquisitions to increase the corporate value of SsangYong Motor to find new buyers."

The union also opposed Edison's acquisition, saying that Edison's plan to build a mass-production line for electric cars only within few months is unrealistic. They also questioned the feasibility of Edison's plan to raise the funds needed to operate SsangYong after the acquisition.

Kim Dae-jong, a professor at the School of Business at Sejong University, said that SsangYong's search for a new owner will become a challenge for President-elect Yoon Suk-yeol if Edison Motors fails to sign the acquisition contract due to the lack of funds.

"The problem is that Edison Motors joined the bidding process for the acquisition of SsangYong Motor even though the company didn't have enough funds to take over. SsangYong should have been taken over by a company that can manage the automaker sufficiently," the professor said.

"It is a pity that this is occurring at this time when Ssangyong Motor is about to change its business structure to being an electric car maker. And considering the weight of SsangYong's impact on the country's auto industry, this issue will be a big concern for President-elect Yoon Suk-yeol. He will have to come up with a clever solution," Kim added.