Both Companies Expect Synergy Effects from Doosan Infracore Acquisition
'Leading Acquisition Candidate' GS Construction Does Not Participate in Main Bid... "DICC Litigation Issue Lacks Solutions... Due Diligence Continues"
[Asia Economy Reporter Ki-min Lee] With GS Construction opting out of the final bid for the sale of Doosan Infracore, the acquisition battle has narrowed down to a two-horse race between Hyundai Heavy Industries Holdings and Eugene Corporation.
According to industry sources on the 24th, Credit Suisse (CS), the lead sales agent, closed the final bid at 2 p.m. that day, with Hyundai Heavy Industries Holdings-Korea Development Bank Investment (KDBI) and Eugene Corporation reportedly participating. Hyundai Heavy Industries Holdings announced immediately after the bid deadline that it had submitted a final bid proposal to acquire Doosan Infracore Co., Ltd.
On the other hand, GS Construction-Dominus Investment, MBK Partners, and Glenwood Private Equity (PE), who were on the preliminary shortlist, did not participate. Eastbridge is known to have decided not to participate before the final bid.
The sale target is 36.07% of Doosan Infracore shares and management rights, excluding Doosan Bobcat held by Doosan Heavy Industries. The market estimates the sale price of Doosan Infracore shares, including the management premium, to be around 1 trillion won.
Hyundai Heavy Industries Group expects to create synergy with its affiliate Hyundai Construction Equipment through the acquisition of Doosan Infracore. Inside and outside the Hyundai Heavy Industries Group, there is high anticipation that Hyundai Construction Equipment can jointly develop and advance Doosan Infracore’s technologies related to excavators and unmanned construction platforms. In particular, the plan to build a joint dealer network to increase global construction equipment market share is also said to have played a part in the decision to participate in the final bid.
Eugene Corporation, which focuses on the building materials business, can also generate a synergistic effect through the construction equipment business. Eugene Corporation has experience in successfully expanding its business after mergers and acquisitions (M&A), such as acquiring Hi-Mart in 2011. Eugene Corporation is also reportedly in favor of acquiring Doosan Infracore for business diversification and global market expansion.
In contrast, other shortlisted candidates did not participate in the final bid, viewing unresolved litigation issues with financial investors (FIs) related to Doosan Infracore’s China subsidiary (DICC) as a significant burden.
In particular, GS Construction, which was expected to compete fiercely with Hyundai Heavy Industries Holdings, stated that it did not participate in the final bid due to insufficient due diligence materials and the lack of a concrete solution to the DICC issue. A GS Construction official said, “We heard verbally from the Doosan Group that they would take responsibility for the DICC issue, but we have not yet received a concrete plan,” adding, “We also did not receive sufficient due diligence materials.” He continued, “However, although we are not participating in this final bid, due diligence will continue.”
In this way, the shortlisted candidates plan to closely monitor the sale situation, considering the circumstances after the final bid. They intend to re-enter the acquisition process under new conditions if the final sale does not materialize.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
