Hyundai Heavy, the 'Dark Horse' in Doosan Infracore Acquisition Battle

Participation in Preliminary Bidding as Preferred Negotiation Partner

Becoming the Largest Company in the Construction Equipment Sector Upon Acquisition

[Asia Economy Reporter Park So-yeon] Hyundai Heavy Industries has participated in the preliminary bidding for the acquisition of Doosan Infracore. If the acquisition is successful, it will become the largest company in the domestic construction equipment sector as well as in shipbuilding.

According to industry sources on the 29th, Hyundai Heavy Industries Holdings, the holding company of Hyundai Heavy Industries Group, announced that it submitted a proposal yesterday in response to the preliminary bidding for the selection of the preferred negotiation partner for the sale of 36.07% stake in Doosan Infracore held by Doosan Heavy Industries. Although it denied acquisition rumors until last month, it recently decided to participate together with KDB Investment (KDBI), an investment subsidiary of KDB Industrial Bank, and submitted the preliminary bid application yesterday. Including the management control premium, the sale price is expected to reach between 800 billion and 1 trillion KRW.

If Hyundai Heavy Industries Group acquires Doosan Infracore, a large construction equipment company with annual sales exceeding 8 trillion KRW will be created overnight. Last year, Hyundai Construction Equipment, an affiliate of Hyundai Heavy Industries Group, and Doosan Infracore (excluding Doosan Bobcat and engine business) recorded sales of 2.8521 trillion KRW and 5.4283 trillion KRW, respectively. Upon acquisition, the domestic construction equipment market will be reorganized into a 'Big 2' structure with Hyundai Construction Equipment, which acquired Doosan Infracore, and Volvo Construction Equipment. There are also forecasts that it will rise to become the world's fifth-largest construction equipment company.

The group's position as a shipbuilding and machinery conglomerate will be further solidified. Hyundai Heavy Industries Group has shipbuilding as one pillar centered on Korea Shipbuilding & Offshore Engineering, an intermediate holding company, while non-shipbuilding sectors such as Hyundai Oilbank, Hyundai Electric, and Hyundai Construction Equipment form a parallel structure under Hyundai Heavy Industries Holdings. Recently, Hyundai Heavy Industries Group has been focusing on streamlining its organization through consolidation and executive restructuring due to deteriorating profitability. Expectations are rising that after completing the acquisition of Daewoo Shipbuilding & Marine Engineering and successfully acquiring Doosan Infracore, the group will be reborn with a business structure centered on shipbuilding and machinery.

It is known that Hyundai Heavy Industries has sufficient financial capacity for the acquisition of Doosan Infracore. As of the consolidated financial statements at the end of June this year, Hyundai Heavy Industries Holdings had cash and cash equivalents of approximately 2.2242 trillion KRW. Hyundai Construction Equipment also holds more than 800 billion KRW in cash and cash equivalents. The corporate merger review is a variable. If Hyundai Heavy Industries Group, a leading acquisition candidate, is confirmed as the acquirer of Doosan Infracore, it will have to undergo corporate merger reviews by domestic and international competition authorities.