Shinsegae withdraws bid for Kumho
Vice chairman suffers setback from flip-flop
By Kim Jae-won
Chung Yong-jin Vice chairman
Shinsegae Group said Friday that it withdrew its bid to buy a controlling stake in Kumho Industrial, two days after it sent a letter of interest (LOI) to the Korea Development Bank (KDB) and Credit Suisse, lead managers of the sales process.
The local retail giant said it notified KDB of its intention to pull out of the bidding process, disappointing creditors of the builder. Kumho Industrial owns a controlling 30.08 percent stake in Asiana Airlines.
“We told KDB that we would withdraw our LOI,” a Shinsegae official said.
Analysts said the local retail giant gave up the bidding because its goal was not to buy the construction company, but to defend its business from its rival Lotte Group which was rumored to buy Kumho Industrial. Lotte did not take part in the bidding process.
Market watchers said Shinsegae Vice Chairman Chung Yong-jin, who led the bidding strategy, suffered a setback because of the flip-flop. Shares of Kumho Industrial dropped 4,050 won, or 13.37 percent to 26,250 won, Friday, as news of Shinsegae’s withdrawal spread.
As Shinsegae drops out of the bidding, Kumho Asiana Group Chairman Park Sam-koo, who has the primary option to buy back the company with the highest bidding price, is likely to get back the company.
Four local private equity funds ― IBKS-Keistone Partners, Jabez Partners, MBK Partners, and IMM Private Equity ― took part in the bidding, but they may have difficulty drawing investors to offer more money than Park can afford, analysts said.
Mid-size builder Hoban Construction, ranked No. 15 among local construction firms as of 2014, was another contender that submitted a letter of intent. It currently owns a 4.95-percent stake in Kumho Industrial and has up to 300 billion won in available capital for the stake purchase.
Late last month, creditor banks KDB and Credit Suisse announced the sale of a 57.5 percent stake, or about 19.55 million shares, in Kumho Industrial, which had just graduated from a five-year debt workout program in December. The builder is the de facto holding company of Kumho Asiana Group, which has Asiana Airlines under its wing.
The builder had been struggling from mounting debt amid adverse real estate market conditions. Kumho Asiana Group, its parent firm, had also been mired in chronic debt after purchasing a 72.1-percent stake in Daewoo Engineering & Construction in 2006 for 6.4 trillion won ($5.8 billion), a deal that was mostly funded by a group of financial investors, including KDB.
The construction company is ranked No. 20 among local builders, according to an annual report released in 2014, but its true value lies in some of its more profitable affiliates over which it holds control.