Control of Daewoo E&C down to two overseas bidders

The Middle East-based Jabez Partners consortium and the U.S.-based TR America consortium have been selected as prospective buyers for Daewoo Engineering and Construction, current owner Kumho Asiana Group announced yesterday.

The conglomerate said in an e-mailed statement that the two have been selected after evaluating the proposals of the three foreign funds, including a Russian-led consortium that showed an interest in buying a controlling stake in Kumho Asiana’s construction unit. Tokyo-based Nomura Securities and the state-run Korea Development Bank, the builder’s main creditor, are arranging the sale.

“We [Kumho Asiana and the sellers] have put priority on choosing bidders based on business management, ability to finance, the bidding price and conditions,” Kumho Asiana said.

Jabez Partners, led by the Abu Dhabi Investment Council, is a private equity fund owned by the United Arab Emirates. The sovereign fund has been a potential candidate as Daewoo E&C’s new owner. TR America consortium’s main investor is U.S.-based construction company Tishman Construction, the largest builder by sales in New York last year. The construction company built the Bank of America Tower, One World Trade Center and the InterContinental New York Times Square.

“Having two preferred bidders allows sound competition in the merging and acquiring process,” the conglomerate said. Though the total price of the deal hasn’t been announced, it is estimated to be around 3.3 trillion won ($2.86 billion) to buy a 50 percent stake plus one share in Daewoo E&C. Kumho Asiana’s decision to sell Daewoo E&C came in June after it began suffering from a liquidity crunch aggravated by the economic crisis.

Three years ago, Kumho Asiana purchased Daewoo E&C for about 6.4 trillion won, of which up to 3.5 trillion won was provided by local banks and other financial firms. Kumho promised to pay those creditors in mid-December 32,000 won for each share they financed if Daewoo’s stock price fell below that level. Yesterday, the firm’s shares closed at 13,900 won.

To secure cash to pay off its creditors, Kumho Asiana had no choice but to sell its controlling stake in Daewoo E&C as well as other subsidiaries. Industry sources estimate that around 4 trillion won is needed to fulfill the original commitment. “Kumho Asiana has been active in restructuring,” said an official from the Korea Development Bank. “The conglomerate will be able to pay back its creditors next month.”

By Lee Eun-joo [angie@joongang.co.kr]