Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
KDB fails to lure foreign firms into Daewoo E&C takeover bid
Daewoo Engineering & Construction's (Daewoo E&C) headquarters in Seoul. Courtesy of Daewoo E&C
By Park Jae-hyuk
By Park Jae-hyuk
Jungheung Construction and a consortium consisting of real estate developer DS Networks, local private equity firm (PEF) SkyLake Equity Partners and infrastructure investor IPM became the two sole participants in the final bid to acquire a controlling stake in Daewoo Engineering & Construction (Daewoo E&C) from KDB Investment, a subsidiary of state-run Korea Development Bank (KDB), according to industry sources and media reports, Friday.
Hoban Construction had previously indicated its intention to participate in the bid, but eventually stayed out of the competition.
Potential foreign buyers ― the Abu Dhabi Investment Authority, one of the largest sovereign wealth funds in the Middle East, and China State Construction Engineering ― also decided not to bid for Daewoo E&C, turning the race for the Korean builder into a domestic competition.
Hahn & Company and IMM Private Equity dropped out of the race earlier, although the PEFs had reviewed their participation in the bid.
The 50.75 percent stake in Daewoo E&C put up for sale is valued at around 2 trillion won ($1.7 billion), because KDB Investment reportedly set the minimum bid price at 9,500 won per share. The price of Daewoo E&C's stock closed at 8,660 won, Friday, up 0.46 percent from the previous session.
At this moment, the seller and the bidders have kept a low profile.
The underwriters of the deal are KDB's M&A department and Bank of America Merrill Lynch.
They are expected to select the preferred bidder next week to finalize the sale within this year.
Daewoo E&C has been put up for sale several times over the past decade.
It was sold to Kumho in 2006 after the dissolution of Daewoo Group, but Kumho put the builder up for sale again in 2009 due to financial difficulties. It was sold eventually to KDB in 2010 as other Korean conglomerates were reluctant to buy the builder during the global financial crisis.
The state-run bank's previous attempt to sell the builder in 2017 fell through, because Hoban Construction, which had been selected as the preferred bidder, dropped out of the deal after realizing Daewoo E&C's large-scale loss from the Safi power station project in Morocco.
In 2019, KDB sold its stake in Daewoo E&C to its subsidiary, KDB Investment.
Market observers view this year as the right moment to sell the construction firm, considering its first-quarter operating and net profits rose 89.7 percent and 138.9 percent year-on-year, respectively.
The Daewoo E&C union, however, has protested fiercely against KDB Investment's latest attempt to sell its stake, criticizing that the exit strategy has been pursued in haste.