GM Korea Declines to Confirm Offer to Buy Back Bank’s 17% Stake

GM Korea declines to confirm media reports that an informal offer has been made to purchase a 17% stake in the auto maker currently held by the Korea Development Bank.

The move would boost General Motor’s ownership in its Korean subsidiary to 94%.

Korean media say Tim Lee, GM vice president and president-International Operations, made an “informal bid” to acquire the stake in an Oct. 19 meeting in Seoul with KDB President Kang Man-soo.

GM Korea spokesman Haeho Park confirms the meeting took place, but refuses comment on the details.

“As a global company, GM is always looking at new ways of doing business,” Park tells WardsAuto. “However, we have nothing but Tim Lee's visit to the KDB to announce at this time. Please let it be understood that the meeting was private.”

Korean news media quote an unnamed source at the KDB who reportedly says the bank will consider selling its 17% stake after receiving a formal offer.

Reports also say GM’s strategy in acquiring the shares is to prevent the KDB from intervening in board decisions.

GM’s history with the KDB has been contemptuous at times. In 2009, during the global financial crisis when the Korean unit was known as GM Daewoo Auto & Technology, it was refused an additional $1 trillion won ($1 billion) credit facility from the bank.

GM Daewoo at the time was heavily indebted to the KDB and in danger of defaulting on loans because of losses sustained in foreign-currency transactions. The bank said it would agree to the additional credit only if the auto maker doubled a rights offering of new shares from roughly 500 billion won to 1 trillion won ($500 million to $1 billion).

The KDB also demanded GM assign technology rights for vehicles developed in Korea to its subsidiary so the technology would reside in Korea and wanted the auto maker to make production guarantees for its Korean plants.

GM turned the tables by acquiring all of the new shares itself, for 491.2 billion won ($413.4 million). This increased the parent’s stake in GM Daewoo to 70.1% from 51.0%, while the KDB’s share fell to 17% from 28%. GM acquired the new shares using funds from its international operations.

GM Daewoo’s other partners, including the KDB, SAIC and Suzuki, did not bid. GM subsequently acquired Suzuki’s stake, increasing its GM Daewoo holdings to roughly 77%. SAIC still holds a 6% share. The GM Daewoo name was changed to GM Korea and all vehicles were rebranded as Chevrolets in March 2011.

A move to acquire greater ownership in GM Korea would be in line with similar moves by GM in Asia. The U.S. auto maker last week increased its holdings in its India subsidiary to 93% after acquiring the 43% stake held by SAIC, for an undisclosed amount.

The transaction has been confirmed by GM India Managing Director Lowell Paddock, but he did not disclose financial details. GM India will launch sales of the Chevrolet Sail in November, a vehicle developed by Shanghai GM in China.