Talks on sale of Doosan E&C halted due to debt issues Doosan Heavy and the suitors couldn't reach an agreement on the builder’s debt issues

Translated by Ryu Ho-joung 공개 2020-04-01 08:00:59

이 기사는 2020년 04월 01일 08:00 더벨 유료페이지에 표출된 기사입니다.

South Korea’s Doosan Engineering & Construction has turned out to have been tapped by several suitors seeking to acquire the construction unit of Doosan Group for the last few months, though talks are not active now.

Doosan Heavy Industries & Construction, which owns Doosan E&C, had held talks with several industry peers and private equity firms which have shown interest in acquiring the builder since the second half of last month, sources familiar with the matter said on March 27. Some of them reportedly were granted the opportunity to conduct due diligence with an access to the company’s financial statements.

Potential buyers were attracted by Doosan E&C’s construction capability and the apartment brand We’ve owned by the builder. They initially expected that the competitive edges of Doosan E&C, including its brand value, would help the company rapidly recover from financial hardships that it is currently experiencing.

However, they are now reportedly reconsidering their plan, with concerns about the company’s financial problems outweighing the merits of the acquisition. Talks between Doosan Heavy and prospective buyers have been halted as no progress was made on an issue relating to debt that Doosan E&C owes to affiliates of Doosan Group, according to the sources.

Some of the potential buyers asked Doosan Heavy to extend the maturity date of such debt slated to mature in the near future. But Doosan Group, including Doosan Heavy, reportedly expressed unwillingness to accept their request. Apart from this, concerns have been also raised during due diligence that the company’s contingent liabilities could further increase.

“We expressed our intention to Doosan Heavy to buy Doosan E&C and were allowed to have access to the target’s financial statements,” one of the sources said. “But we couldn’t reach an agreement with Doosan Group on the extension of the maturity date of the debt owed to its affiliates.”

There are currently no talks between Doosan Heavy and prospect buyers. Still, it is too early to conclude that talks have been completely fallen through as some of the suitors have shown continued interest in Doosan E&C, industry observers said.

But some pointed out that, in order for a deal to happen, there should be terms to lessen investor concerns over Doosan E&C’s financial problems.

“Prospective buyers thought that the acquisition would result in the winner’s curse if no agreement is reached on potential contingent liabilities and the extension of the maturity date of the debt owed to Doosan affiliates,” an industry insider said. “There is little chance of a deal unless Doosan Group changes its mind.”

(By reporter Choi Ik-hwan)
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