(EDITORIAL from the Korea Times on Nov. 27)

No more fire sale
Firms should not repeat haste-makes-waste pattern

Few large corporate sell-offs made here over the past decade or so have been
without one sort of controversy or another.

In most cases of problematic cross-border M&A, Koreans have blamed foreign buyers
for what they viewed as unethical business practices, such as targeting only
short-term speculative gains or stealing hard-won technology by exploiting the
sellers' weak positions. Foreigners have countered that Koreans didn't know the
world of corporate acquisition and changed their minds before and after the
crisis.
It is against such a controversial backdrop that Daewoo Engineering and
Construction, the nation's third-largest builder, has been put on the block.
Initial signs do not appear encouraging, though.
Above all, there are wide differences in the views between Kumho Asiana Group,
the parent company of Daewoo E&C, and outside analysts as well as its labor union
in their evaluations of the two foreign funds ??? Middle East-based Jabez
Partners and U.S.-headquartered TR America Consortium ??? which have recently
been selected as the preferred bidders.
Kumho Asiana says both of the private equity funds are sound investors with
sufficient financial resources and will guide the builder to a stable growth
track. The organized labor and more than a few market analysts, however, raise
serious questions on not just these companies' funding capacity but even their
corporate identities, particularly citing the Middle Eastern organization's
capitalization remains at a mere 50 million won ($43,000), and their common
recalcitrance to even deposit money as a guarantee to their commitment.
We are not in a position to discern their contrasting arguments. Granted, the
unionists' claims may reflect in part their displeasure with the possibility of
drastic restructuring but the company should not dismiss neutral and objective
views of market watchers.
If the foreign bidders are as good as the management says, it would not only help
Kumho Asiana to get out of a serious financial pinch but also remove one more
burden on the national economy as well. In case the would-be buyers prove to be
irresponsible speculators, however, it would only add one more disgraceful
incident to international M&A history.
This is why the firm's creditors and regulators should not leave the sell-off
proceeding to Kumho Asiana alone. Come to think of it, the seed of misfortune was
sown when the transport-logistics chaebol took over Daewoo E&C, one of Korea's
best construction firms in terms of corporate performance and cutting-edge
technology in the plant and nuclear power generation, which exceeded the funding
capacity of the group, forcing it to offer an excessive buy-back option of its
shares.
Therefore, we think the best way is to let go of some of the family-controlled
conglomerates, which made irrational decisions out of greed that caused them to
go beyond their means, while signaling to others that the era of ``TBTF
(too-big-to-fail)" has passed. If that is difficult in reality, related parties
should restart the bidding from the ground up after clarifying all suspicions
surrounding the existing bidders, through active intervention of its main
creditor, the Korea Development Bank.
Regulatory authorities for their part should waste no more time to come up with
legal and institutional devices to prevent the recurrence of M&A-related
problems, such as violations of agreements or unwarranted technology theft. It is
long past time for Korea to stop bungling deals and even accepting foreign
criticisms about xenophobia even in the world of business.
(END)