Deadline for Final Bids on the Afternoon of the 25th
Hoban Construction Does Not Participate
On the 25th, with two companies, Jungheung Construction and DS Networks, participating in the final bid for the sale of Daewoo Engineering & Construction, the acquisition battle for Daewoo E&C has turned into a two-way contest. Hoban Construction, which had been rumored to reattempt the acquisition, did not participate.
According to the investment and real estate industries on the 25th, KDB Investment, the largest shareholder of Daewoo E&C (holding 50.75% stake), received acquisition proposals from the mid-sized construction company Jungheung Construction and the real estate development company DS Networks consortium by the afternoon deadline.
The sale target is the 50.75% stake in Daewoo E&C held by KDB Investment. Considering the management premium, the expected sale price is estimated to be in the 2 trillion KRW range.
Jungheung Construction is a representative construction company in Honam, consisting of Jungheung Togeon, ranked 15th in construction capability evaluation within the group, and Jungheung Construction, ranked 35th. In addition, the Jungheung Group has about 30 subsidiaries in housing, construction, and civil engineering sectors. According to the Fair Trade Commission, the total assets of the Jungheung Group amount to 9.207 trillion KRW. Jungheung Construction's sales last year were 1.473 trillion KRW.
DS Networks also submitted a letter of intent (LOI) during the 2017 Daewoo E&C sale attempt and has appeared in acquisition bids for Samhwan Enterprise and Doosan Construction, pushing to expand its business into construction.
KDB Investment, a restructuring subsidiary of the Korea Development Bank, is reportedly planning to select a preferred negotiation partner as early as next month and complete the sale process within this year.
KDB Investment is said to have decided to receive a bid deposit of about 50 billion KRW. The bid deposit will be included in the acquisition price. This is interpreted as a measure to avoid a repeat of the failed sale in 2018.
Daewoo E&C was also up for sale three years ago but the deal fell through. In January 2018, Hoban Construction was selected as the preferred negotiation partner, but the sale failed due to issues with Daewoo E&C’s overseas business site deficits.
Since then, Daewoo E&C’s performance has improved, and its corporate value has increased by consecutively winning large-scale overseas projects. Last year, Daewoo E&C’s operating profit (consolidated) was 558.3 billion KRW, up 53.3% from the previous year. In the first quarter of this year, consolidated operating profit was 229.4 billion KRW, an 89.7% increase compared to the same period last year.
Meanwhile, the Daewoo E&C labor union has expressed concerns about the sale, demanding a transparent public sale process. In a recent statement, the union said, "It is not normal to require submission of a bid within 25 days to decide the acquisition price of a construction company with sales exceeding 8 trillion KRW," adding, "Another wrong sale should not cause enormous social costs."
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