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| Daewoo Engineering & Construction headquarters in downtown Seoul |
The field has narrowed to a handful of players seeking to acquire a controlling stake in Daewoo Engineering & Construction (E&C) from the state-run Korea Development Bank (KDB), financial industry sources familiar with the issue said Friday.
They are Hoban Construction, a mid-tier builder based in the southwestern part of the country, U.S. investment company TRAC and two other unnamed investment entities reportedly set up by Saudi Aramco and Petronas, a Malaysian state-run oil and gas company.
The four bidders will begin conducting due diligence on Daewoo E&C over the next four weeks, according to two sales managers: Mirae Asset Daewoo and Bank of America Merrill Lynch.
The managers will then organize a final bid in late December and select a preferred bidder in January. If everything goes as planned, the KDB expects to sign a stock purchase agreement (SPA) for its 50.75 percent stake in the builder in April.
On Nov. 13, the sales managers had previously chosen a group of 10 companies from home and abroad, which submitted their preliminary bids for Daewoo E&C.
The 50.75 percent stake is valued at about 1.5 trillion won ($1.35 billion), given Daewoo's share price is hovering around 6,200 won per share. But KDB wants at least 2 trillion won, including a management premium.
In the third quarter of this year, the builder earned 3.1 trillion won in sales, up 10.4 percent from the previous year. Its operating profit rose 7 percent to 113.8 billion won.
In 2010, KDB acquired the builder for 2.2 trillion won from Kumho Asiana Group, which was crumbling under mounting debt. It later injected an additional 1 trillion won into Daewoo when the latter issued new shares.
The sale has reportedly been attracting attention, particularly from Middle East-based investment funds, because of Daewoo's extensive knowhow and expertise in the construction of refineries and other industrial facilities.
Chances are that Daewoo could follow in the footsteps of Ssangyong Engineering & Construction, which the Investment Corporation of Dubai acquired in early 2015.
But according to some industry analysts, Hoban may decide to bet big on Daewoo to outbid foreign rivals. If so, Hoban would become Korea's third-largest builder by construction capacity.
"Whoever it may be, we want to find a new owner so we don't have to be distracted by all the fuss about the takeover," a company official said. "In the past, KDB failed to find a buyer but this time we want it to work harder to successfully dispose of its stake. The bank's past failures adversely affected employee morale and prompted some workers to quit."
The official said Daewoo employees want a financially-sound entity that is willing to invest in the builder to acquire its managerial control. "Given Korea's prolonged sluggish construction industry, my bet is a foreign company will take over the company."
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