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Doosan Group

Debt-laden Doosan Group puts Doosan Infracore up for sale to secure cash

Jul 24, 2020 (Gmt+09:00)

Doosan Group kicked off the sale process for Doosan Infracore, the group’s construction equipment builder, with the sale manager Credit Suisse sending out teaser letters to potential buyers on July 24, according to creditors and sources from private equity funds.

The sale is part of Doosan Group's efforts to keep the cash-strapped Doosan Heavy Industries & Construction afloat. The power plant builder Doosan Heavy took a heavy hit when the government announced plans to depart from nuclear and coal power which had been the core business for the company.

Doosan Group will be selling a 36.07% stake in Doosan Infracore held by Doosan Heavy. The stake value is estimated to be around 540 billion won ($448 million) based on Doosan Infracore’s market cap of 1.51 trillion won as of July 24.

The sale price is expected to start anywhere between 700 billion won to 800 billion won including the premium for management control.

The non-binding bid will take place in August, followed by the binding bid in September.

Doosan Infracore manufactures and sells construction equipment and engines such as excavators. Doosan Infracore’s turnover in 2019 was around 4 trillion won - not including Doosan Bobcat - and EBITDA close to 500 billion won.

Doosan Bobcat is not part of the sale, and it is likely that Doosan Infracore will be carved out as a holding company with the operating company and Bobcat as separate units. Doosan Group is keen on selling Infracore first and holding onto Bobcat although there are a handful of potential buyers who want to buy both operations.

Doosan Group acquired Bobcat, a utility equipment business, from US-based industrial equipment company Ingersoll Rand in 2007 for $4.9 billion. It was the largest overseas acquisition at the time - one that pushed Doosan Group into debt.

Both domestic and overseas private equity funds and strategic investors have shown interest in the Doosan Infracore deal.

“Major PEs are going to take a close look at the deal given that the premium is quite low compared to the company’s revenue and operating profit. Also, there’s a chance that there could be follow up deals such as Bobcat,” said a source from the PE industry.

The deal’s biggest setback will be Doosan Infracore’s lawsuit with financial investors including IMM Private Equity. In 2011, the company had raised 380 billion won from financial investors through its China-based unit based on a commitment to go public by April 2014.

However, the company was unable to get listed by the promised date due to poor market conditions.

The financial investors tried to exercise their drag-along rights to sell a 100% stake in the company but they were unsuccessful. The financial investors filed a suit to the Seoul Central District Court arguing that Doosan did not cooperate in the due diligence process. The court ruled in favor of Doosan during the first ruling in 2017, but the financial investors won the second ruling at the Seoul High Court.

Both parties are waiting for the Supreme Court ruling. Doosan Group and IMM PE have requested the Supreme Court to speed up the process.

The Seoul High Court ordered Doosan to pay 710 billion won to the financial investors including the principal sum of 380 billion in addition to the 15% IRR. The amount could easily go up to 1 trillion won if it includes interests.

This means that the buyer of Doosan Infracore may have to cough up a hefty sum if the Supreme Court rules in favor of the financial investors after the deal is completed. Still, there is a chance that the involved parties may negotiate for the sale to go smoothly.

China-based business account for a sizeable portion of Doosan Infracore. The sales in China were a bit stagnant earlier this year due to the global coronavirus, but the business picked up following the sharp rebound in China’s economy.

On July 20, the company announced that it sold 10,728 excavators in China which is 10% higher than the first half of the previous year when the company sold 9,707 excavators.

Doosan Infracore (formerly Daewoo Heavy Industry & Machinery) was acquired by Doosan Group in 2005. This acquisition, followed by a series of deals in the industrial sector, helped transition Doosan Group's core business from the food & beverage sector to heavy industries.


Write to Sang-eun Lucia Lee at

Danbee Lee edited this article

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