Jungheung Construction Pursues Acquisition of Daewoo Construction... Sale Price Expected to Reach 2 Trillion Won Range

Jungheung Construction, a mid-sized construction company in the Honam region, has attracted attention for the feasibility of its bid to acquire Daewoo Construction. Jungheung Construction has been evaluated as having relatively well-accumulated funds so far.

According to the construction and investment banking (IB) industries on the 26th, Jungheung Construction recently began internal preparations for acquiring Daewoo Construction. Since Hoban Construction's acquisition of Daewoo Construction fell through once in 2018, the outcome is uncertain, but if the price conditions are met, there is a possibility of rapid progress.

The stake for sale in Daewoo Construction is 50.75%, held by KDB Investment. The market values this stake at around 2 trillion won. When Daewoo Construction was publicly sold in 2017, Hoban Construction offered an amount in the mid-1 trillion won range. Considering the recent significant improvement in Daewoo Construction's profitability and the outlook for the construction industry, the 2 trillion won range is considered reasonable.

Jung Chang-sun, Chairman of Jungheung Construction

Jungheung Construction's equity capital, which was around 90 billion won in 2011, increased more than sixfold to 600.6 billion won last year. The contingent liability ratio was reduced to about one-tenth. Credit rating agencies consider a combined contingent liability and debt ratio below 300% to be favorable, and Jungheung Construction stands at 215.64%. The liquidity assets held by subsidiaries and others are also abundant. Jungheung Construction's liquid assets amount to 463 billion won, but the liquidity assets of its core affiliate, Jungheung Togeon, reach the 2 trillion won level. Jungheung Construction's participation in the acquisition appears to reflect the will of Jung Chang-sun, chairman of the Jungheung Group. At this year's New Year's press conference, he stated, "We will acquire a large company within three years and enter the top 20 in the business world rankings," adding, "We can secure about 4 trillion won in liquidity within three years."

Daewoo Construction is also accelerating its sale process. Last month, Daewoo Construction reappointed CEO Kim Hyung as the business representative and switched to a dual representative system for business and management divisions. At the same time, CFO Vice President Jung Hang-gi was promoted to president and newly appointed as the management representative. It is interpreted that financial expert Jung Hang-gi is focusing on the sale process to respond effectively to the sale.

According to the 2021 disclosure target corporate group designation status announced by the Fair Trade Commission, the total assets of the Jungheung Group amount to 9.207 trillion won, ranking 47th. If the acquisition of Daewoo Construction succeeds, the total assets will increase to 19.054 trillion won, ensuring entry into the top 20 in the business world rankings.

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