Hyundai Heavy, and five other Korean groups shortlisted for Doosan Infracore deal

Doosan Group has shortlisted six bidders, including Hyundai Heavy Industries Holdings Co., and four local private equity groups, to acquire a controlling stake in Doosan Infracore Co. valued at up to $850 million, according to creditors and financial industry sources on Oct. 7.

Newly named bidders include South Korean private equity firm Hahn & Company and a consortium of Korea-based wind tower manufacturer CS Wind Corporation and local PE firm EastBridge Partners. Local construction materials maker Eugene Group was also included on the shortlist, as it seeks financial investors to join forces for the deal.

Eugene Group's participation in the bid has drawn attention as its current operations would have good synergy with Doosan Infracore, although it remains unclear if the group will be able to finish the race without financial investors.

Last week, a consortium of Hyundai Heavy, the world’s biggest shipbuilder, and state-run Korea Development Bank alongside PE firms including MBK Partners and Glenwood Private Equity submitted bids. There were in total eight bidders that participated in the preliminary bid, but three were eliminated as their proposed price was too low.

The 36.07% stake sale in Doosan Infracore is part of Doosan Group's efforts to keep the debt-laden Doosan Heavy Industries & Construction Co. afloat. The group pledged to raise 3 trillion won through the sale of core assets and paid-in capital increases in return for a 3.6 trillion won bailout from creditors.

In addition to Doosan Infracore's stake sale, the group is also seeking potential buyers for construction affiliate Doosan Engineering & Construction Co. and plans to raise 1.3 trillion won through rights issues by year-end.

The sale of Doosan Infracore will ease the parent group's self-rescue efforts. Initially, there were reservations regarding Doosan Infracore's stake sale given that the company is entangled in a lawsuit with some financial investors, including IMM Private Equity, that may cause hiccups in the deal process.

These concerns were appeased thanks to Doosan Group stepping in and saying it would take responsibility if they lose the case. The legal industry says it is likely for the Supreme Court to rule in favor of Doosan Group, reversing the judgment and remanding the case in which the financial investors’ damages will be recalculated and settled at a much lower amount.

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

China-based business accounts for a sizable portion of Doosan Infracore's revenue. Sales in China were a bit stagnant earlier this year due to the global coronavirus, but the business picked up following a sharp rebound in China’s economy. In the first half of this year, the company posted a 10% increase in excavator sales compared to the same period last year.

Write to Ri-ahn Kim and Jun-ho Cha at knra@hankyung.com


(Updated on Oct. 8, 2020 to add Eugene Group to the list of shortlisted bidders)