GS Construction to Jointly Participate in Doosan Infracore Acquisition with Private Equity Fund

[Asia Economy Reporter Donghyun Choi] GS Engineering & Construction has entered the bidding for the acquisition of Doosan Infracore. This move is interpreted as a strategic step to diversify its business away from a profit structure focused on housing and construction projects amid prolonged adverse conditions such as the COVID-19 pandemic.

According to the investment banking (IB) industry on the 21st, GS Engineering & Construction formed a consortium with the private equity fund (PEF) Dominus Investment to jointly participate in the Doosan Infracore acquisition bid. They will compete with six other candidates, including the Hyundai Heavy Industries Holdings-KDBI consortium. Credit Suisse, the sales agent, selected and notified qualified candidates such as the Hyundai Heavy Industries consortium, Eugene Group, Glenwood PE, MBK Partners, and East Bridge Partners on the 7th. GS Engineering & Construction has rapidly emerged as a leading candidate alongside these groups.

The background for GS Engineering & Construction's entry into the acquisition bid is interpreted as a move toward business diversification. As of the first quarter of this year, most of GS Engineering & Construction's sales come from architecture and housing (54%) and plant and power (36.9%). In this situation, the company appears to be seeking to open a new path in the construction equipment market to reduce risk. If GS Engineering & Construction acquires Doosan Infracore, it will enter the construction equipment market and aim for vertical integration. Internally, there is a focus on Doosan Infracore's overseas growth potential. Notably, it sold 10,000 excavators in China alone in the first half of this year, demonstrating a strong position in that market.

With GS Engineering & Construction's operating profit for the third quarter of this year rising 12% year-on-year to 210.3 billion KRW, its financial capacity appears sufficient. Domestic securities firms estimate the company's cumulative pre-sale performance at about 22,000 housing units, exceeding last year's annual supply volume of 16,616 units by GS Engineering & Construction. Domestic and overseas plant orders have also approached 7.5 trillion KRW by the third quarter, reflecting solid performance this year and indicating ample capacity to explore new businesses. An industry insider explained, "It is understood that GS Engineering & Construction plans to co-manage Doosan Infracore jointly with its partner Dominus PE if it acquires the company."

Meanwhile, Doosan Infracore is considered a key part of the Doosan Group's self-rescue plan. The Doosan Group has already completed the sale of assets such as the Motrol BG division, Neoplux, Doosan Solus, Club Mow CC, and Doosan Tower. Currently, Hyundai Heavy Industries Group is regarded as a leading acquisition candidate.