Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
Will unprecedented re-bid for Daewoo E&C have a happy ending?
The headquarters of Daewoo E&C in central Seoul / Yonhap
By Anna J. Park
Price gap between Jungheung and DS Networks consortium narrows in second bidding
By Anna J. Park
Will Daewoo E&C be able to find a new owner this time? The builder has been looking for a new buyer since Hoban Construction backed out after being chosen as a preferred bidder in 2018, dashing hopes of the main creditor Korea Development Bank (KDB) to recoup its loans.
Launched in 1973, Daewoo E&C grew to become one of Korea's top construction companies and enjoyed its heyday until parent Daewoo Group imploded under massive loans during the height of the 1997 Asian Financial Crisis. The builder was acquired by Kumho Asiana Group in 2006, but was resold just three years later due to financial problems. Since then, KDB has ended up with a 50.75 percent stake for 3.2 trillion won ($2.8 billion). The state-run bank handed the management rights for Daewoo E&C to KDBI in 2019.
But Daewoo E&C has been displaying a stronger earnings performance recently, with its first-quarter net profit surging 138.9 percent year-on-year to 147.9 billion won, while operating profit nearly doubled to 229.4 billion. This has raised hopes of the builder finding a new buyer.
Mid-sized Jungheung Construction and a consortium of DS Networks, SkyLake Investment and IPM Korea are currently competing to acquire Daewoo E&C. According to investment banking industry sources, Bank of America Merrill Lynch, the lead manager of the sale, received new offers earlier this month from the two bidders only a week after the first one was canceled.
The headquarters of Daewoo E&C in central Seoul / Courtesy of Daewoo E&C
Both parties reportedly offered prices ranging between 2 trillion won and 2.1 trillion won for the KDB's 50.75 percent stake, which has narrowed the price gap between the two considerably.
In the previous bidding, Jungheung Construction offered 2.3 trillion won, while the DS Networks consortium offered 1.8 trillion won. Jungheung apparently cancelled its bid when it discovered how low the other bid was. As a result, an unprecedented second round of bidding has been conducted, generating considerable controversy. Daewoo E&C's union demanded KDBI suspend the bidding process, claiming that it constitutes preferential treatment by discounting the sale price for a “certain company.” The union called on the state-run bank to start a new, transparent and fair round of bidding.
Despite such protests, KDBI allowed the bidders to change their offers by up to a maximum of 3 percent of their first bids. Market watchers believe KDBI decided to conduct the second round of bidding, in order to ensure Daewoo E&C was sold.
Even if a new preferred bidder is selected as early as later this week, the controversy over the bid could continue for a while. If Jungheung Construction is selected, it will be unable to avoid criticism of receiving preferential treatment. If the DS Networks consortium wins, Jungheung could claim that it was the winner of the first bid and question the validity of the second bid.