Chemical giant China National Bluestar Group yesterday signed a memorandum of understanding with creditors to buy Ssangyong Motor, South Korea's fourth-largest automaker.

The memorandum, signed in Seoul, gives Bluestar an exclusive right to buy a 55.4 per cent stake in Ssangyong worth US$620 million, beating out General Motors (GM), German-US DaimlerChrysler and China's Shanghai Automotive Industry Corp (SAIC).

If the deal is finalized, Bluestar will become the second Chinese firm to have an equity stake in a foreign automaker, but the first to have a controlling stake.

In October last year, SAIC, one of China's biggest automakers, acquired a 10 per cent stake in GM Daewoo Automotive & Technology Co, US General Motors' venture in South Korea.

Bluestar's move also appears to follow China's call for domestic companies to go abroad to become competitive multinationals.

"We aim to present takeover prices by the end of January,'' said Liu Xiangqiu, vice-president of Bluestar.

However, Liu did not reveal any financial details.

Bluestar will be permitted to launch a three-week due diligence study on Ssangyong, according to officials at Chohung Bank, the automaker's major creditor.

Ssangyong now has an annual production capacity of 180,000 vehicles with a work force of 7,500.

Analysts said the deal will be a good way for Bluestar to enter the vehicle manufacturing business.

The Beijing-based Bluestar, established in 1984, is a State-owned company in China with total assets of 20 billion yuan (US$2.4 billion).

The company acquired 40 former military vehicle repair and assembly companies two years ago and now has five auto assembly plants in China.

It also runs joint ventures with two South Korean auto parts makers, and supplies parts to a plant of Hyundai Motors, South Korea's largest automaker, in Beijing.

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