Daewoo set for breakup to bring back wary bidders

Daewoo set for breakup to bring back wary bidders

SEPT 21: South Korean creditor banks admitted today that they may have to break up bankrupt Daewoo Motor Co because potential suitors are wary of a complete takeover.

Uhm Rak-Yong, head of Korea Development Bank, said, "The position of creditors is to sell Daewoo in a package deal. "But we will remain flexible during negotiations. If the potential buyer makes really good proposals, we will consider excluding some of Daewoo Motor's assets from the deal."

Following Ford's dramatic pullout, General Motors, which is worried about Daewoo's mounting losses, has hesitantly said it was talking with Fiat. DaimlerChrysler at first said it was not interested in a new offer. It has since indicated it might buy parts of Daewoo if it was broken up, according to German press reports. The creditors had sought new offers by the end of September but that now looked optimistic, said analysts.

"We have yet to send our invitiations to GM and Hyundai-Daimler," said the KDB chief who has taken charge of the new auction. "Talks are under way with these firms before sending them out." The only other option is for a lone Hyundai Motor bid ornationalisation.

Ford to re-acquire hertz: Ford Motor Co said on Thursday it offered to re-acquire the 18.5 per cent of Hertz Corp, the world's largest car rental company, that it does not already own for $30 a share, or $597 million total.

Ford, the world's number two automaker, spun off a minority stake in Hertz in a 1997 initial public offering, taking advantage of investor interest in car rental companies. The carmaker currently owns 81.5 per cent of Hertz and would buy 19.9 million shares, based on the 107.7 million shares outstanding listed in Hertz's second-quarter results.

Ford said the $30 share price represents a premium of 24 per cent over Hertz's Sept 20 closing price of $24-1/4, which equalled a 52-week low established the day before. The stock, listed on the New York Stock Exchange, hit a 52-week high of $51-3/4 during trading on Jan. 19.

On August 31, Hertz warned that third-and fourth-quarter profits would not meet expectations because of lower demand caused by airport travel disruptions. The stock fell sharply after the announcement. Ford's proposal is subject to approval of the Hertz board of directors, the board's favourable recommendation to Hertz shareholders and the negotiation, execution and performance of a definitive merger agreement.

"Since the Hertz IPO in 1997, we have intensified our focus on becoming the world's leading consumer company for automotive products and services," Ford chief financial officer Henry Wallace said in a statement. "Hertz is one of the world's strongest brands and an integral part of this focus. Acquiring the minority interest will support this strategy and enhance the operating flexibility between us and Hertz."

Ford is embroiled in a controversy over a rollover problem linked to 103 US highway deaths after treads separated on Firestone tires used by the Ford Explorer sport utility vehicle.

The proposed Hertz acquisition comes as Ford said on Sept 14 that it will repurchase up to $5 billion of stock. The timing of the announcement surprised analysts due to the controversy. Ford had about $25.6 billion in cash and cash equivalents at the end of the second quarter, but the company paid out $5.7 billion to shareholders on Aug 8 in a shareholder enhancement plan.

In an effort to put its cash to use, Ford nearly entered a deal to buy South Korea's Daewoo Motor Co Ltd. The purchase of the debt-burdened company was abruptly cancelled earlier this month. JP Morgan & Co is advising Ford on the proposed transaction with Hertz.