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By Lee Hyo-sik
Staff Reporter
Two foreign funds ― Middle East-based Jabez Partners and U.S. TR America consortium ― have been picked as preferred bidders for Daewoo Engineering & Construction, Kumho Asiana Group said Monday.
Korea's ninth largest conglomerate said the two investors have shown a great deal of interest in the nation's third largest builder, saying both of them were capable of creating positive synergy for Daewoo with their existing businesses either in the Middle East or in North America.
"We decided to name two preferred bidders, which is quite normal in a merger and acquisition (M&A) process to promote healthy competition and improve the sales price and other conditions for the seller. Both of them are proven to be solid and financially sound strategic investors who can raise necessary capital to acquire the builder," Kumho said in a statement. The group then said it will consult with the two about the schedule of future negotiations, including a due diligence date.
Jabez Partners was founded in 1977 by the Abu Dhabi Investment Authority (ADIA), a sovereign wealth fund owned by Abu Dhabi, the United Arab Emirates, with $800 billion under management. The fund is reportedly attracted to Daewoo, as the builder grew through large-sized construction projects in the oil-rich region during the 1970s and '80s.
TR America consortium was set up by U.S.-based builder Tishman Construction, which has been seeking to advance into the booming Asian construction sector.
However, Daewoo workers are opposing the sale of the company to foreign capital, insisting Kumho Asiana's plan to sell the builder to foreign capital is tantamount to a "fraud" against the whole nation.
Hours before Kumho's announcement of the preferred bidders, Daewoo's labor union said in a statement that all three final bidders for the country's third largest builder were "speculative" foreign funds, arguing that whoever takes Daewoo over will dispose of profitable company assets to recoup its investment and later sell the builder to a third party for capital gains. "Daewoo could also end up like Ssangyong Motors where advanced manufacturing technologies were illegally leaked to its foreign owner," it said.
The union also said all three final bidders did not specify how they will raise capital needed to purchase a controlling stake in Daewoo, or details on how they will acquire and manage the builder, adding they do not have proven investment track records.
"It is nonsense that Jabez Partners capitalized at only 50 million won has been selected as a preferred bidder because Jabez's main stakeholder ADIA has told us that it is not interested in acquiring Daewoo. Kumho's attempt to sell the builder to foreign capital amounts to a scam. Financial regulators and the Korea Development Bank (KDB) should step in and stop the sale of Daewoo," the union said.
However, Kumho and the KDB are determined to go ahead with the planned sale. The group expects to significantly improve its liquidity problems through the sale of its construction unit.
According to the sources, the three foreign investors were reportedly willing to buy shares of the firm at between 20,000 won and 24,000 won a share. Daewoo stocks have been traded at around 13,000 to 14,000 won over the past month. If Kumho Asiana Group sells a 50 percent-plus-1 share at 20,000 won per share, it would receive close to 3.3 trillion won.
With hundreds of billions of won generated from sales of Kumho Life Insurance and other group assets, the business group will likely be able to resolve the put option deal it signed with Kookmin Bank and 17 other financial services firms in 2006.
At the time, Kumho promised to buy back the builder's shares on Dec. 15, 2009 if they want to sell their holdings at the pre-set price of 31,500 won per share in return for a 3-trillion-won investment, expecting that the stock prices would hover well above the mark. The group spent 6.5 trillion won to take over a 72.1-percent stake in Daewoo.
However, the buy-back option proved to be a disaster as Daewoo shares plummeted to below 15,000 won in the aftermath of the global credit crunch late last year.
Against such a backdrop, the group has been making all-out efforts to secure liquidity through the sale of assets owned by its business units.
The construction and logistics-based conglomerate has been plagued by rumors that it is facing a liquidity crunch, as it has had to pay back loans and other financial obligations accumulated over the past few years after acquiring Daewoo Engineering & Construction and Korea Express.
leehs@koreatimes.co.kr
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