POSCO to sell stake in construction unit to Saudi fund

By Park Jin-hai

POSCO will sign a deal to sell a 38 percent stake in POSCO Engineering and Construction (E&C) to a Saudi sovereign fund this month, company officials said Tuesday.

POSCO E&C held a board of directors meeting Monday and decided to issue new shares worth 400 billion won and sell them to the Public Investment Fund (PIF) of Saudi Arabia.

Previously, POSCO Group, the company’s largest shareholder, said during a recent board of directors meeting that it would sell a 25 percent stake in POSCO E&C, which is worth about 800 billion won.

When the deal is finalized, the Saudi sovereign fund will be the second largest shareholder of POSCO E&C, after POSCO Group which currently holds an 89.5 percent stake in the construction company.

POSCO plans to sign an agreement with PIF by mid-June.

The world's fifth-largest steelmaker has pushed for the sale of the stake in the construction unit as part of restructuring efforts to improve the financial state of the group.

It initially planned to sign a contract with the Saudi government by March to establish a joint construction company.

However, the plan stalled when the prosecution launched a criminal investigation into the construction firm over the alleged creation of a 10 billion won slush fund, which has made it uncertain whether the venture will materialize.

The construction firm will be engaged in various local projects to build social infrastructure in Saudi Arabia.

“By getting an investment from the Saudi fund, we expect to expand our foothold in the Middle East, where our presence has been meager compared with Latin America,” said a POSCO E&C official.