Doosan Pursues Sale of InfraCore and Construction Units Amid Poor Affiliate Divestment Performance

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] Doosan Group is pushing for the separate sale of Doosan Infracore and Doosan Construction to normalize management. Although Doosan Group declared that it would secure more than 3 trillion won through asset and affiliate sales, it failed to produce visible results, leading it to finally bring out the plan to separately sell affiliates that had been postponed as a lower priority.

According to the investment industry on the 16th, Doosan Group recently selected Credit Suisse (CS) as the lead manager for the sale and began the process of selling Doosan Infracore. The sale target is the 36.27% stake in Doosan Infracore held by Doosan Heavy Industries & Construction. Doosan Infracore is a core affiliate of Doosan Group, recording sales of 8.1858 trillion won and operating profit of 840.4 billion won last year. The market estimates the sale price of Doosan Infracore, excluding its subsidiary Doosan Bobcat, to be between 600 billion and 800 billion won. An industry insider evaluated, "Doosan Infracore is a company that consistently generates profits, and since the Chinese construction machinery market has recovered, it is an attractive asset for potential buyers." However, there is also an opinion that if Doosan Bobcat is separated from Doosan Infracore, the likelihood of a quick sale is low. Dong-ik Jung, a researcher at KB Securities, assessed, "If Doosan Bobcat, which accounted for 62.9% of the construction machinery consolidated operating profit last year, is separated, Doosan Infracore loses its appeal as a sale item." Especially considering that the separate borrowings at the end of Q1 this year amount to 2.9 trillion won and that a lawsuit worth 719.6 billion won related to the sale of the Chinese corporation (DICC) stake is ongoing, it is expected that it will take a long time to complete the sale.

Along with this, Doosan Group is also pushing for the separate sale of only the sellable assets of Doosan Construction. Doosan Group has been trying to sell Doosan Construction since last year but has been shunned by potential buyers due to technology, business conditions, and asset status. Therefore, it is observed that Doosan Group decided to leave behind assets with concerns about insolvency and sell only selected assets. Doosan Construction will transfer to the newly established company Valuegross the unrecovered receivables related to Incheon Hakin Doosan We’ve Apartments, Ilsan Zenith shopping mall, Hanuri (Kan) Resort, and land in Gongju Shingwan. After the split, Doosan Construction will have assets of 2.23 trillion won and liabilities of 1.78 trillion won, while Valuegross will have assets of 250 billion won and liabilities of 80 billion won.

Doosan Group’s decision to separately sell only the core assets of Doosan Construction along with Doosan Infracore, which was previously a lower priority for sale, is due to the sluggish progress of the sales of Doosan Solus, Motrol BG, golf course Club Mow, and Doosan Tower. Initially, Doosan Group expected that selling 61% of Doosan Solus shares and management rights held by Doosan Corporation and major shareholders for around 800 billion won would attract buyers due to market value. However, potential buyers showed a temperature gap by suggesting an appropriate price in the 600 billion won range, considering that Doosan Solus’s current battery copper foil production volume is about 10,000 tons, which is significantly lower than competitors. Especially, due to the investment freeze caused by the COVID-19 pandemic, major conglomerates such as Lotte and SK did not participate in the recent preliminary bidding, resulting in a failure to attract interest.

Motrol BG, a hydraulic equipment business unit of Doosan Corporation, was also put up for sale in the 400 billion to 500 billion won range, but it is reported that strategic investors’ (SI) participation in the preliminary bidding was low. The sale of Doosan Heavy Industries & Construction’s golf course Club Mow CC is also sluggish due to price issues. Doosan Heavy Industries & Construction is demanding more than 160 billion won, but potential buyers consider 140 billion won to be an appropriate price. Doosan Tower is in the final stages of sale at around 700 billion won, but after excluding taxes and debts, Doosan Group can secure about 200 billion won.

This content was produced with the assistance of AI translation services.