Daewoo Division Goes To Wild Card Group –

The first major buyout of an Asian company will be led by a group little known to the private equity community.

Earlier this month, South Korea’s Daewoo Group announced its intention to sell most of its electronics division to Beverly Hills-based Walid Alomar & Associates for $3.2 billion. Walid Alomar & Associates-headed by an Arab-American investor of the same name-is an entity formed specifically for the Daewoo transaction, in which Daewoo management, executives at Walid Alomar & Associates and at least two U.S. financial groups have equity stakes, according to Steven Kalabat, a project director at Walid Alomar & Associates.

Kalabat declined to name the groups involved in the transaction, but noted the financial groups signed on to the deal were “household names.” A source familiar with the situation said no private equity firm with a dedicated Asia fund was involved in the deal. The transaction may close as early as next month, he said.

Should it close, the deal will mark the largest private transaction to date in Asia, according to market observers. It will be closely watched by private equity firms with Asia funds who believe the region is ripe for control transactions. Furthermore, Alomar’s involvement in the deal confirms an iron rule of business in Asia-nothing gets done without connections.

Walid Alomar Rises in the East

The transaction will give Walid Alomar & Associates control of approximately 80% of Daewoo Electronics’ assets, including operations in Western Europe, North and South America, Japan, South Korea and Australia. The division generates annual revenue of approximately $3.3 billion in those countries. The new company temporarily will be called New DEC. Daewoo Group will continue to own operations in Southeast Asia, China, India, Brazil, Eastern Europe, the Middle East and Africa.

Walid Alomar & Associates reportedly will retain Daewoo Electronics’ president, Yang Jae-yuel, to run New DEC.

The transaction will involve approximately $1.2 billion in equity, according to a private equity source in Asia. Kalabat, however, said this figure is inaccurate, declining to comment further.

In June, Daewoo Group’s creditors allowed the company to delay debt repayments for six months. Daewoo Group-one of South Korea’s largest chaebol, or conglomerates-is struggling under $48 billion in debt, $4 billion of which is owed by the electronics division.

Houlihan, Lokey, Howard & Zukin, a Los Angeles-based investment bank, is advising Walid Alomar on the transaction.

Alomar is a U.S. citizen who was born to Iraqi parents in Saudi Arabia and educated in London. An engineer by training, he made his fortune investing in infrastructure projects, including five power plants in China.

Exactly how Alomar ended up at the front of the Daewoo deal in a region prowled by the likes of Chase Capital Partners and H&Q Asia Pacific, both private equity firms raising sizeable Asia funds, remains something of a mystery. One private equity professional in Asia, who declined to speak on the record, said he was surprised at the news that Alomar would lead the deal. He wasn’t the only one. A source close to Walid Alomar & Associates said a question frequently posed to the investment group’s spokespeople is, “Who are these people?”

According to Kenneth Chiate, Alomar’s attorney and a partner at the law firm Pillsbury Madison & Sutro LLP, Alomar was approached by Daewoo earlier this year and asked to form a team of investors to acquire the electronics division. Alomar had no prior relationships with Daewoo management, Chiate said.

“[Alomar] is known as a businessperson with contacts in various industries,” Chiate added. “His strong suit is in making deals happen.”

For example, Alomar helped establish a cellular phone company in China that subsequently was acquired by Metromedia China Corp. He also has worked on business development projects in Russia and Saudi Arabia. Earlier in the decade, he reportedly arranged for the transport of medical equipment to U.S. troops during Operation Desert Storm.

“[Alomar] has the expertise to maneuver between various bureaucracies and make things happen,” said Kalabat.

According to the South Korean press, Alomar’s key partner in the deal is Bae Sun-Hun, South Korea’s former minister of information and technology, and the former chairman of Daewoo Electronics.

Kalabat said Daewoo Electronics’ product line and operations remain very strong. He added Walid Alomar & Associates will be acquiring $1 billion worth of research and development and as a result, New DEC will be on the market with new multimedia and Internet appliance products within a year.

Looking to Set a Precedent

The South Korean government has said it is pressuring the country’s powerful chaebol to sell off debt-laden assets and concentrate on core businesses. This has led many U.S. private equity firms to predict a windfall of buyout activity in the country (BUYOUTS June 21, p. 1). “This deal is laying the groundwork for the next couple of years,” said an executive from one such firm, who declined to speak on the record. “If the [South Korean] government has the courage to push this through, this is great.”

The executive added his firm also is considering making bids for other Daewoo Group spin-offs.