Investors from UAE, China show interest
Daewoo Group was once one of the biggest conglomerates in Korea. But the traces of the now-defunct group are hard to find, with the sole exception of Daewoo Engineering & Construction (E&C).
In fact, Daewoo E&C is also owned by the state-run Korea Development Bank (KDB), which put the builder up for sale with a few investors showing interest.
On the lips of observers are the Abu Dhabi Investment Authority (ADIA), the sovereign wealth fund owned by UAE, China State Construction Engineering, and Korea’s Jungheung Construction.
KDB holds a 50.75-percent stake in Daewoo through its affiliate, and the controlling stake’s value is expected to near $2 billion.
With the help of such advisors as Bank of America and EY Korea, KDB will receive preliminary bids later this month to short-list candidates from at home and abroad.
After carrying out due diligence, they will have to offer binding bids in August.
Observers point out that this is the right time for KDB to unload Daewoo, which saw its bottom line almost double during the first quarter of 2021 from a year ago.
During the January-March period, the contractor’s sales amounted to 558.3 billion ($500 million) won, up 53.5 percent from a year before, while its operating profit stood at 229.4 billion won ($205 million), up 89.7 percent.
“Since the third quarter of 2020, the construction and housing segments have underpinned the performances of Daewoo,” Yuanta Securities analyst Kim Ki-ryong said.
“In time with the M&A, chances are that Daewoo’s share prices may face some fluctuations. But the mergers will eventually boost the company’s performances and valuations.”
Of note is that Daewoo’s trade union members are ready to raise their voices regarding the M&A.
“KDB should review the disposal of Daewoo E&C from scratch and consult with Daewoo workers to increase the firm’s higher sustainability and successful sales,” a Daewoo unionist said.
“Only candidates ready to properly operate Daewoo E&C will be able to take part in the competition to take over the company.”
Daewoo E&C is headed by CEO Kim Hyung.