SEOUL– SsangYong Motor Co., the South Korean unit of Indian carmaker Mahindra & Mahindra Ltd., said Monday it has canceled the deal to sell its controlling stake to Edison Motors Co. due to the electric bus maker’s payment failure.
SsangYong announced the termination of the contract with a local consortium led by Edison Motors, under which it had offered to buy the SUV-focused carmaker for 304.8 billion won (US$249.1 million).
Edison has paid 10 percent of the acquisition money but failed to pay the remaining 274.3 billion won by the March 25 deadline.
“The contract was automatically canceled as the Edison-led consortium did not pay the remainder for the acquisition five business days before the date of the creditors’ meeting (on April 1),” SsangYong said in a regulatory filing.
SsangYong’s creditors were planning to discuss on April 1 whether to approve Edison’s debt payment plans if the remainder was paid fully.
In response to SsangYong’s cancellation of the deal, Edison Motors has filed for an injunction to retain its position as the preferred bidder for SsangYong, an Edison spokesman said by phone.
Edison will ask the court to place the initial 10 percent down payment under provisional attachment, he said.
In the following steps, SsangYong plans to look for a new buyer and submit a new rehabilitation plan to the Seoul Bankruptcy Court, the company said without providing any specific timeframe for the submission.
In January, the Edison consortium signed a final deal with SsangYong on the takeover following the court’s approval of the acquisition plan.
But Edison Motors has had trouble raising funds for the takeover deal as Edison EV, its key affiliate involved in the funding, is struggling with its own financial trouble with consecutive operating losses.
SsangYong’s creditors and labor union were opposing the acquisition as they objected to the low debt payment ratio in the rehabilitation plan.
Edison Motors had requested the court allow the creditors’ meeting to be postponed to May 23 or later to buy time for the takeover process.
On Monday, Edison EV plunged by the daily limit of 30 percent to end at 12,250 won. The broader KOSPI fell 0.02 percent to 2,729.56. Trading of SsangYong shares has been suspended since Dec. 21, 2020.
KPMG Samj ong Accounting Corp., the auditor of SsangYong, declined to give its opinion on the carmaker’s annual financial statements for the year 2020.
SsangYong could be delisted if its accounting firm again refuses to offer an opinion on the company’s annual performance for the year of 2021 after the one-year period.
On April 14, the Korea Exchange (KRX) is expected to decide whether to delist SsangYong from the country’s main bourse based on this year’s audit results and the court-led M&A conditions.
The collapse of the deal marks yet another setback to SsangYong, which was placed under a court-led restructuring program in April last year after its Indian parent parent failed to attract an investor amid the COVID-19 pandemic and its worsening financial status.
Edison has said it will set up a special purpose company to raise from 800 billion won to 1 trillion won starting this year to invest in a stake of SsangYong through various means, including a rights issue, loans and bond issuance, to achieve a turnaround within three to five years.
Edison said it aims to transform SsangYong into an EV-focused carmaker in the next decade in line with changes in the automobile market.
China-based SAIC Motor Corp. acquired a 51 percent stake in SsangYong in 2004 but relinquished its control of the carmaker in 2009 in the wake of the global financial crisis.
In 2011, Mahindra acquired a 70 percent stake in SsangYong for 523 billion won and now holds a 74.65 percent stake in the carmaker.
For the whole of 2021, its vehicle sales fell 22 percent to 84,106 units from 107,324 a year earlier amid the pandemic and chip shortages.
SsangYong’s lineup consists of the Tivoli, Korando, Rexton and Rexton Sports SUVs.
Source: Yonhap News Agency