이 기사는 2021년 06월 01일 08:00 thebell 에 표출된 기사입니다.

Hoban Construction may consider acquiring Daewoo E&C again after the mid-sized builder called off a deal to buy its bigger rival three years ago, as it seeks to expand its business portfolio.

Several industry players are showing interest in a controlling stake owned by the state-controlled Korea Development Bank (KDB). Among them are Jungheung Construction, a mid-sized construction company based in Gwangju, and a consortium led by property developer DS Networks, which is working with Morgan Stanley as its adviser. They both submitted non-binding offers to KDB, according to industry sources.

Another local builder being named as a potential buyer is Hoban Construction. In 2017, the property company attempted to acquire Daewoo E&C from KDB, although it ultimately pulled out of the deal.

Hoban Construction might still be interested in buying Daewoo E&C, industry watchers said. The company has been seeking to diversify its business beyond the domestic residential property market, which was the main reason Hoban targeted Daewoo E&C in the first place.

“Hoban Construction has a strong position in the domestic residential property construction market, but it clearly needs to diversify its business to reduce concentration risk,” an industry insider said, adding that most of its revenue and earnings are exposed to South Korea’s property market cycles and real estate regulations.

Hoban has grown rapidly, with its revenue exceeding 2 trillion won ($1.8 billion) in 2019 and its rank among industry players by construction capacity climbing from 49th in 2011 to 12th in 2020. However, as the domestic property market slowed down, 2020 revenue plummeted 61% year-on-year to 968.5 billion won. Its operating income and net income decreased 97.5% and 76.1%, respectively, in the same period.

Hoban previously withdrew from the deal because of concerns over losses from one of Daewoo E&C’s overseas projects, which were not identified during due diligence. Hoban tried to renegotiate the price with KDB to reflect the losses but they failed to reach an agreement.

Some are skeptical about whether Hoban will join the race for Daewoo E&C again, saying that the renegotiations between the two sides never went smoothly.

“A 300 billion loss from Daewoo E&C’s Safi power plant project in Morocco was disclosed at the last minute, which shocked Hoban because that was different from what it heard from the seller during the due diligence process,” said another industry insider.

“The deal was structured in a way to pass on the losses to Hoban and the company’s management was very much disappointed by that.” (Reporting by Byung-yoon Kim)