Take care of Daewoo E&C

Daewoo Engineering and Construction is about to be sold to a foreign buyer. The builder’s current owner, Kumho Asiana Group, selected the Middle East-based Jabez Partners consortium and the U.S.-based TR America consortium as its prospective buyers. The main contract is expected to be signed in the middle of next month.

The unionized workers of Daewoo Engineering and Construction are opposed to the idea that the company will be sold to a foreign buyout firm. It is hard to deny that the nation has strong feelings against having a domestic company sold to foreign buyers. We have had painful experiences with similar deals involving Ssangyong Motor and Korea First Bank.

And yet, Kumho Asiana and Korea Development Bank are in a position in which they have to sell Daewoo E&C at the highest price possible before Dec. 15 in order to finance a payback option that will mature by then.

To survive, Kumho Asiana needs the additional 1 trillion won to 3.3 trillion won ($865 million to $2.85 billion) proposed by each consortium.

No Korean companies participated in the bidding, leaving creditors little choice other than to sell Daewoo E&C to a foreign bidder.

It is something of a luxury for others to debate about who the bidders are. Meanwhile, the situation is extremely urgent. It is imperative to encourage competition among the bidders, so the deal can be closed at the highest price.

Daewoo E&C is a prominent company with advanced technologies in plants and nuclear power stations.

At the same time, however, no matter how urgent the situation, it is also important that the synergy between all involved be considered before a final choice is made.

Foreign buyout companies are often only after profits and tend to break a company apart only to sell it to a third party. A move like that would largely damage Daewoo E&C’s growth potential as well as its future value. It is important to evaluate which consortium will benefit Daewoo E&C and help it to win construction orders overseas. That may be the only way to ease the public’s concerns about selling what many consider to be a national asset to a foreign buyer.

The merger and acquisition of Daewoo E&C is a multitrillion-won deal. The two consortia, however, have not yet made public how they will finance the deal. Stable financing must be thoroughly reviewed during the negotiation process.

Daewoo E&C has had a turbulent history over the past decade, and it is our hope that the deal will be closed smoothly.