Dongbu’s plant sale falters

Questions are arising whether Dongbu Group, the nation’s 17th-largest conglomerate, can successfully execute its 3 trillion won ($2.7 billion) financial restructuring plan with the sale of Dongbu Steel’s Incheon plant not going well.

Along with Hyundai and Hanjin, Dongbu Group was a conglomerate that announced plans last year to improve its financial health and get out of a liquidity crisis. The group has put up for sale semiconductor manufacturer Dongbu HiTek, logistics affiliate Dongbu Express, Dongbu Metal, Dongbu Power Corporation and Dongbu Steel’s Incheon plant.

The sale of Dongbu Express is so far going smoothly as a deal with KTB Private Equity is set to be sealed no later than next month. The price is expected to be around 670 billion won. Dongbu HiTek is also ready to find a new owner as Korea Development Bank, its main creditor, will send letters to possible buyers this month. Five companies are known to be interested, according to industry sources.

But a big part of Dongbu’s financial restructuring plan is the sale of Dongbu Steel’s Incheon plant for around 1 trillion won, accounting for one-third of the financial restructuring plan.

According to local media reports, Korea Development Bank recently sent a proposal to Posco, the nation’s largest steelmaker, to buy the Incheon plant and Dongbu Power Corporation in Dangjin, South Chungcheong, as a package.

But Posco denied it has received the request and has been signaling that it will not go for the acquisition. After the arrival of new Chairman Kwon Oh-joon, the company has been trying to focus on boosting internal stability rather than bulking up its size.

Other major players like Hyundai Steel and Dongkuk Steel are not interested, saying that the price is too high and the Incheon plant is old. Dongbu Group acquired the plant in 1984.

While Korean companies are uninterested, some Chinese companies have been eying the Incheon plant, especially Baoshan Iron & Steel.

Although the plant is old, the Chinese company is interested because it can produce some 450,000 tons of color rolled steel sheets per year. Dongbu has the second-largest market share for that product in the local market.

BY JOO KYUNG-DON [kjoo@joongang.co.kr]