Indian Handset Maker Micromax Eyes Stake In Pantech

Apr 14, 2014

Indian Handset Maker Micromax Eyes Stake In Pantech

By Min-Jeong Lee and R. Jai Krishna

Micromax Informatics, a privately held Indian handset maker, is eyeing a stake purchase in struggling South Korean peer Pantech, in which Qualcomm and Samsung Electronics005930.SE +0.37% own a stake,  people familiar with the situation said Monday.

Pantech, after struggling to eke out a profit in the global smartphone market, decided last year that it will focus on domestic sales only. But competition in its  home market has been stiff with Samsung and LG Electronics ag066570.SE +0.29%gressively churning out new models, leading the company to seek help from its creditors in February. The company is currently under review by its creditors to find an optimal way to restructure its massive debt of more than $1 billion.

“Merger and acquisition is being reviewed as a promising way to [revive] the company,” one person familiar with the matter said.  The person said while it would be favorable for Pantech to be acquired by another Korean company, there hasn’t been much interest from potential buyers.

“The decision will be made by the creditors, after [relevant] due diligence has been conducted,” another person familiar with the matter said.

It’s unclear whether Micromax would buy a minor stake or a controlling one.

An investment by New Delhi-based Micromax,which currently ranks second in terms of smartphone shipments in India behind Samsung,  could help the company in its global ambitions to expand outside of India, the world’s third-largest smartphone market by users.  Micromax could also benefit by having access to Pantech’s high-end smartphone technologies as well as its manufacturing facilities, analysts say. Pantech would benefit from Micromax’s broad retail sales channels in India,  they said.

Micromax is backed by U.S. private equity firms Sequoia Capital and TA Associates.

An investment by Micromax could also kickstart consolidation in the crowded smartphone market in Asia, where manufacturers are targeting  global markets by offering better quality smartphones at much lower prices than Apple and Samsung.

As of Sept. 30, Pantech’s debt stood at $1.18 billion, surpassing its total assets of $998 million.  It has reported six straight quarters of net losses, according to regulatory filings.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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