Squeezed out by electronics giants Samsung and LG in the domestic market, Dongbu Daewoo Electronics, a small, affordable electronics provider, is looking for a new owner that is highly likely to be a foreign entity.

According to the financial industry on Tuesday, a few foreign electronics businesses have shown interest in taking over management rights of the Korean company that is struggling to make a profit, and some meaningful deal may be clinched this month.

One of the likely foreign buyers is Qingdao-based Aucma, a similar electronics manufacturer. The Chinese company has made attempts to acquire a total of 46 percent stake in the Korean firm, but progress has been slow due to unknown reasons.

“Since the Chinese company is a state-backed business, the approval process seems to be taking some time,” a financial source said. “Because it is quite a competitive company with outstanding refrigerating technologies in the Chinese electronics market, marriage with Dongbu Daewoo may create some synergy for both.”

Formerly known as Daewoo Electronics, the company was acquired by Dongbu Group in 2013 after experiencing liquidity problems in the late 1990s, and has tried to focus on small niche markets that are often missed out by larger premium players. About 80 percent of the company’s sales are made from exports to emerging economies like South American and Southeast Asian countries.

Dongbu Group is now seeking to sell the 46 percent stake in the electronics unit with management rights because it has nearly failed to meet requirements imposed by its financial investors in exchange for 135.6 billion won ($120.6 million) worth financial aid in 2013.

One of the requirements was to have the electronics business go public on the stock market by 2018, but an initial public offering is considered a tough challenge for Dongbu Daewoo considering its drastically slashed operating profit from 9.5 billion in 2015 to 1.9 billion last year.

As a result, the company’s net asset value plunged from 180 billion won to around 160 billion won.

If the company fails to go public, it must pay 8 percent interest to the investors for the borrowed fund.

“Due to the burdensome requirements, we are in the process of finding a new investor,” a company official said. “China’s Aucma is a possible candidate with some positive prospects.”

The company captured market attention last year by introducing the industry’s first wall-mounted washing machine for one-person households, which posted 150,000 units in accumulated sales worldwide.  

However, because the company’s products are priced in the mid-range, profit margins are low compared to premium electronics makers like Samsung and LG.

“Since the company is heavily dependent on exports, changes in foreign exchange rates affected last year’s profit significantly, largely due to some uncertainties stemmed from political issues,” said a company spokesman.

By Song Su-hyun (song@heraldcorp.com)