Advertisement of Erae AMS (photo captured from Erae AMS’ website)
A controlling stake in Erae AMS Co., formerly Delphi Automotive Systems’ South Korean affiliate, is on sale with eight potential bidders eyeing profitability of the automotive parts supplier to General Motors Co.’s Korean operation and Hyundai Motor Group’s Kia Corp.
The mid-sized company’s advisor Samhwa Accounting Corp. has received letters of intent from eight potential investors interested in an 80.6% stake in the car parts maker between June 28 and July 5, according to investment banking sources.
The potential bidders are four financial investors and four consortiums of strategic and financial investors, including an auto component maker on the main Kospi and private equity firms. They will conduct a due diligence for a month and join the bid on August 12, sources said.
“The car parts maker is robust and wouldn’t have been on the sale if the parent Erae cs Co. hadn’t filed for bankruptcy reorganization,” said a banking industry official. “The parent company’s rehabilitation will be accelerated once the sale of Erae AMS is completed,” the official added.
The parent Erae cs, which started a bankruptcy reorganization process in April 2023, is poised to sell shares in its auto parts units – an 80.6% stake in Erae AMS and a 30% stake in Estra Automotive System Co. – for around 100 billion won ($72.4 million) to repay 163 billion won worth of debt in cash.
The sale procedure will be led by a court in Changwon of South Gyeongsang Province although Erae CS’ top creditor is state-run Korea Development Bank (KDB).
Erae AMS and Estra Automotive were formerly Delphi Automotive, which was spun off from General Motors in 1999. Erae cs acquired a 42.3% stake in Delphi Korea for 190 billion won in 2011 and an additional 50% stake for about 100 billion won in 2015 and split the company into Erae AMS and Estra Automotive.
Erae AMS provides drive systems, infotainment and autonomous driving solutions to GM Korea Co. In April, the company signed a contract with Kia to supply military vehicle components worth 18.5 billion won for five years.
The car parts maker posted 10.9 billion won in operating profit last year, nearly double the surplus in 2022. Its revenue rose 7.3% on-year to reach 576.6 billion won last year.
Erae cs is estimated to have achieved a record-high 9.8 billion won operating profit and 98 billion won revenue last year on a separate basis. The strong sales in GM’s Chevrolet Trax Crossover led to the rise in Erae cs’ earnings.
By Jong-Kwan Park
pjk@hankyung.com
Jihyun Kim edited this article.
