KDBI "Jungheung Construction Shows Strong Will and Plans to Acquire Daewoo Construction" (Comprehensive)

Selected as Preferred Negotiation Partner for Daewoo E&C Acquisition
Estimated Sale Price in Early 20 Trillion KRW Range
KDBI: "Deal Completion More Important Than Highest Price"

Exterior view of Eulji Twin Tower, the headquarters of Daewoo E&C

Jungheung Construction, a mid-sized construction company, was selected as the preferred bidder for the acquisition of Daewoo Engineering & Construction, the 6th largest company in the construction industry, on the 5th. Jungheung Construction reportedly presented a concrete financing plan for the acquisition of Daewoo Engineering & Construction and proposed a vision and strategy to maximize synergy effects after the merger.

KDB Investment (KDBI), the largest shareholder of Daewoo Engineering & Construction, held an online press conference on the same day and announced, "KDBI and the sales advisory firm have selected the Jungheung consortium as the preferred bidder for the Daewoo Engineering & Construction M&A, and the Skylake consortium as the secondary negotiation candidate."

Lee Daehyun, CEO of KDBI, said, "The selection of the preferred and secondary negotiation candidates was made after comprehensively considering the sale price, speed and certainty of the transaction, and Daewoo Engineering & Construction's growth and stable management."

According to KDBI, on the 25th of last month, they received final bid proposals for the sale of Daewoo Engineering & Construction, and two parties, Jungheung Construction and the DS Networks consortium, submitted acquisition proposals. It was reported that Jungheung Construction offered 2.3 trillion KRW as the acquisition price, while the DS Networks consortium offered 1.8 trillion KRW. The price difference was so large that Jungheung Construction was effectively chosen as the preferred bidder.

According to KDBI, after the final bid, Jungheung Construction requested some modifications to the acquisition price and non-price conditions. KDBI informed the Skylake consortium of Jungheung Construction's modification request and asked them to submit a revised proposal if they wished.

It is analyzed that KDBI requested both parties to submit new prices to prevent the worst-case scenario of acquisition failure, as Jungheung Construction considered giving up the acquisition due to the large price gap with the second bidder.

The sale target this time is 50.75% of Daewoo Engineering & Construction shares held by KDBI. Jungheung Construction, selected as the preferred bidder, must pay a bid deposit of about 50 billion KRW.

The bid deposit is included in the acquisition price. This is interpreted as a measure to prevent a repeat of the failed sale in 2018.

In January 2018, Hoban Construction was selected as the preferred bidder, but the sale failed due to issues with Daewoo Engineering & Construction's overseas project deficiencies.

Since then, Daewoo Engineering & Construction's performance has improved, and its corporate value has increased as it consecutively won large overseas construction projects, leading to the sale process being promoted after three years.

Unlike Hoban Construction, Jungheung Construction is reportedly putting considerable effort and strong will into this acquisition.

CEO Lee said, "By reviewing the acquisition proposal submitted by Jungheung Construction, it was understood that they have significant will and plans for the overseas and civil plant sectors," adding, "It seemed that Jungheung Construction had long kept the acquisition of Daewoo Engineering & Construction in mind and conducted considerable study."

CEO Lee repeatedly emphasized that the most important aspect of this M&A is not the 'highest sale price' but the 'completion of the sale.'

He said, "We recognize that Daewoo Engineering & Construction has been a so-called 'ownerless company' for over 20 years, and now finding the 'real owner' is a common and urgent task for all stakeholders related to Daewoo Engineering & Construction."

He emphasized, "The primary goal of the M&A was to verify the sincerity of investors as much as possible and minimize the impact on Daewoo Engineering & Construction's operations and employees." He also explained, "In designing the detailed sale procedures, we applied principles of maximizing sale price, ensuring transaction completion, speedy transaction closure, and conducting a fair process."

CEO Lee said, "After reviewing the acquirer's financing plan with the sale lead manager, we judged that there is no problem in executing and closing this M&A deal."

Daewoo Engineering & Construction ranks 6th in the construction industry based on construction capability evaluation. Jungheung Construction represents the Honam region and includes Jungheung Togeon, ranked 15th in construction capability within the group, and Jungheung Construction, ranked 35th.

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