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Blue Star: Acquisition Talks on Ssangyong Motor Underway

Chemical giant China National Blue Star Corp Thursday announced that it is still in talks with Ssangyong Motors to acquire the No. 4 car producer in the Republic of Korea (ROK).

"It is not time to say that we have finally abandoned the acquisition, although we disagree with Ssangyong on a number of issues," said Blue Star spokeswoman Li Aiqing, without elaborating further.

Li's remark tried to refute foreign media reports that said Blue Star had given up the acquisition, mainly because of disputes on sale price between the two parties.

The state-run Blue Star was reported to have offered US$600-700 million for a 51-per-cent stake in Ssangyong. But the automaker's creditors wanted the Chinese firm to narrow the range of its offer and required the Chinese Government's backing for the deal.

Blue Star beat out a number of rivals, such as Shanghai Automotive Industry Corp (SAIC) - one of China's biggest State-run automakers - as the preferred bidder for Ssangyong last December.

But SAIC, General Motors' main partner in China, argued that it alone had received Chinese Government approval to bid for Ssangyong.

Analysts say discrepancies between Blue Star and Ssangyong will give SAIC a fresh opportunity to control the ROK automaker.

"We have known that there are changes in Blue Star's bid for Ssangyong, and we will keep close tabs on the developments," SAIC spokesman Xue Hao told China Daily yesterday.

SAIC has formed links with Ssangyong, as Shanghai Huizhong, SAIC's subsidiary, and started to produce vans earlier this month under a technical licensing deal with Ssangyong.

"The whole thing indicates that the road is rocky for a non-auto company to enter into the lucrative auto industry through mergers and acquisitions of existing automakers, especially those overseas," said Zhang Xin, an auto analyst with Guotai & Jun'an Securities Co.

"Blue Star has abundant capital, but it is not favored by the government compared with SAIC because the former is a layman for the auto industry while the latter is a well-established State-owned automaker."

Blue Star, which dominate the domestic industrial cleaning market, reported sales of 10.2 billion yuan (US$1.2 billion) last year, climbing 67 per cent from 2002. Its assets now total 20 billion yuan (US$2.4 billion).

Blue Star last month signed a letter of intent with British automaker Manganese Bronze Holdings to set up a joint venture to make taxis in Lanzhou, capital of northeast China's Gansu Province.

(China Daily March 26, 2004)

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