Top S. Korean firms hit by M&A aftermath
2/9/2008 16:41
A series of top tier companies are facing liquidity problems after
executing aggressive merger & acquisition (M&A), the Korea Times
reported today.
Kumho Asiana Group, South Korea's seventh largest
conglomerate, was the first to send the market negative signals about its cash
shortage problem, which stemmed from series of M&A deals over the past few
years.
The group has bought major firms, including Daewoo Engineering &
Construction, the nation's No.1 builder, and Korea Express, the country's top
logistics company, in 2006 and 2008 respectively.
After the two deals, the
status of Kumho-Asiana's corporate went up only for a short period, and soon the
company's stock price plunged and credit rating slashed reflecting the dangerous
liquidity levels. Stock price of STX Group units, the shipbuilding group, is
also continuously falling after its announcement in August to double the stake
in No.1 European ship maker Aker Yards.
Investors' growing concerns over the
company's cash levels resulted in 12 percent fall of shares after the
announcement.
Another top-20 company that has taking a similar path is Kolon
Group. The company's shares slipped 15 percent, mainly due to its key
construction subsidiary's sagging business.
According to Korea times, rumors
of liquidity squeeze are likely to be contagious, as there are no immediate
signs that the domestic and global economies will recover.
Xinhua
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