Wounded tigers fall to poachers

The crisis-hit ‘tiger’ economies are providing bargains galore for Western investors in what could turn out to be South-east Asia’s sale of the century, says David Kilburn.

Economic turmoil in Asia is providing new opportunities for Western companies to build business at bargain prices. Devaluation, as well as the falling value of stock prices, means that foreign buyers can acquire companies at 50 per cent less than a year ago.

An investor bringing $1m to Thailand, for instance, can convert it to about 40 million baht now, compared with just 25 million in June this year. Not surprisingly, Bangkok is swarming with merger and acquisition specialists from merchant banks. Jakarta and Seoul likewise. Malaysia, where prime minister Mahathir is railing at financiers, is attracting less interest.

Investing for growth, both General Motors and Ford Motor Company are building huge assembly plants in Thailand and preparing to open more factories in South-east Asia and China.

Surprisingly, Japan’s early advance into South-east Asia, means that Japanese auto makers have been hit hard by falling demand. Honda has halved production at its large factory in Thailand, and Toyota has shut two factories for the rest of 1997.

In contrast, Ford has found that falling currencies mean investments and locally sourced parts are less expensive in dollar terms.

At the same time, demand for new vehicles has plunged across the region so there are fewer dollars to be made on smaller sales volumes. But they will be well placed when things finally pick up.

Meanwhile, in South Korea, where major corporations are going bankrupt one after another, Procter & Gamble is planning to ac-quire control of Ssangyong Paper, which is a lead ing Korean producer of tissues.

Ssangyong, one of South Korea’s biggest conglomerates, is selling the paper subsidiary to cover billions of dollars in debts accumulated by Ssangyong Motor Co.

This will be the first major foreign takeover of a South Korean company. Under the agreement, Ssangyong Group will sell 24.99 per cent of the company for $69m (42m) to P&G, which will buy additional Ssangyong Paper stock to increase its stake to 51 per cent, to gain management control.

There’s also another kind of opportunity. The financial problems of many Asian consumer goods firms mean that some will be starved of marketing funds. For example, the Haitai Group, a food and retail giant, and Korea’s 24th largest business conglomerate is slowly slipping into bankruptcy as subsidiaries miss loan payments or file for court protection. The two strongest companies in the group, Haitai Confectionery and Haitai Beverage, are facing strong competition from rivals such as Coca-Cola because Haitai cannot afford to match the cuts and could lose much of its seven per cent market share. Other Haitai brands have had promotion budgets cut and will doubtless see brand shares eroded.

Haitai is also Ogilvy & Mather’s majority partner in the Korad, Ogilvy & Mather advertising agency and is trying to sell its share for a price based more on sentiment than real value.

Chief among the contenders could be Daewoo, the agency’s larg-est client. Doubtless this presents O&M with both an opportunity, and a headache considering the rivalry between Daewoo and Ford.

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