Shanghai Automotive Industry Corp.(SAIC), China's largest automaker, Tuesday signed memorandum of understanding (MOU) to purchase Ssangyong Motor Co.(SYMC), South Korean fourth largest automaker, with the latter's creditors.

SAIC and Chohung Bank, the main creditor of SYMC , signed the MOU in Hillton Hotel in downtown Seoul Tuesday morning. Under the MOU, SAIC was chosen as the exclusive preferred buyer to purchase 48.9 percent shares of SYMC.

The two sides will conduct further investigation and negotiation, and if they agreed with conditions proposed by each other, they will finally sign the definitive agreements around this September or October, according to SAIC's President Hu Maoyuan.

After the takeover, SAIC will become the biggest shareholder ofSYMC. Hu said in the signature ceremony that "SAIC will further develop SYMC's business in South Korea, preserving and improving the company's existing facilities and making necessary investmentsin the future."

"Shanghai Automotive and Ssangyong will jointly explore ways ofexpanding business in the global market to achieve synergy effects," said Hu, adding the existing management team and employees of SYMC will be maintained after the acquisition.

"SAIC is the market leader in China for the production and sale of passenger vehicles and parts, and SYMC is the markets leader in the SUV (Sports Utility Vehicle) segment in South Korea.The businesses and products of two enterprises are highly complementary," Hu pointed out.

"Through this partnership, SYMC will be able to take full advantages of SAIC's market leadership to distribute its products in China, and SAIC on the other hand, will establish a firm foothold in the international auto market place."

SAIC, one of the largest state owned enterprises in China, posted 11.7 billion US dollars' sales in 2003. It recently joined the Global Fortune 500 list.

Ssangyong Motor has been up for sale since its creditors bailedit out following the 1997-1998 financial crisis.

The South Korean company went into restructuring in 2000. SYMC reported sales of 2.8 billion dollars and net earnings of 510 million dollars in 2003.

Source: Xinhua