Korea's large corporations are losing out in overseas large-scale deals one after another. That's largely because they are being outcompeted by deep-pocketed foreign buyers that bet big based on low interest rates. According to investment banking industry sources on March 29, instances in which Korean large firms lost out in cross-border deals against foreign rivals have increased.
For example, in a bidding to acquire the Jurong Aromatics Corp. stake in which Hanwha Total and Lotte Chemical took part in, both Korean companies failed to land the deal. Both companies made an offer of 1.0-1.5 trillion won in the main bidding, they were outbid by ExxonMobil. It was reported that the U.S.-based oil multinational offered an all-cash price of 2 trillion won.
Early this month, Hanwha Techwin also failed to acquire the gas turbine unit of Siemens after competing neck-and-neck with foreign bidders to the end. CJ Group tried in vain to purchase American frozen food manufacturer Bellisio Foods at the end of last year. Even though CJ offered a price of 1 trillion won, much higher than 700-800 billion won considered adequate by investment bankers, an affiliate of Thailand's CP Group grabbed the deal by offering 1.26 trillion won.
The main reason for Korean corporations' inability to win mammoth deals has to do with the current financial market situation. Foreign acquirers are getting bolder in offering fantastic prices as liquidity can be had more easily due to low interest rates. In addition, private equity firms are more aggressive than ever before in betting big due to the ease of financing funds.