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Doosan Infracore

GS E&C challenges Hyundai Heavy in Doosan deal

Oct 22, 2020 (Gmt+09:00)

GS Engineering & Construction Co. (GS E&C) has joined the bidding for a stake in Doosan Infracore Co. after the bid submission deadline, a move that could turn the tables against Hyundai Heavy Industries Holdings Co. in the auction.

In a preliminary bidding for a 36% stake in Infracore worth up to $850 million, the building arm of South Korea’s seventh-largest conglomerate GS Group teamed up with Korean private equity firm Dominus Investment Co. The consortium recently handed in a letter of intent to sale manager Credit Suisse, according to investment banking sources on Oct. 21.

GS E&C’s participation came after Doosan Group shortlisted six bidding groups, including Hyundai Heavy, earlier this month. The world’s biggest shipbuilder had been touted as the strongest candidate before GS E&C stepped in. Korean constructions materials maker Eugene Group and four local private equity groups, including MBK Partners, are also on the shortlist.

Hyundai Heavy brought in state-run Korea Development Bank’s arm KDB Investment as its financial partner, amid controversy over the latter’s participation in the competition as a unit of Doosan’s main creditor bank.

The shortlisted bidders are now conducting due diligence on the construction heavy equipment maker, using virtual data rooms, the sources said.

The 36% stake up for sale is held by Doosan Heavy Industries & Construction Co. The stake deal is part of Doosan Group's efforts to keep debt-laden Doosan Heavy afloat.

GS E&C emerged as a strong bidder, given its cash holdings worth 1.9 trillion won as of the end of June. Its financial partner Dominus specializes in mezzanine investments ranging from convertible and exchangeable bonds to bonds with warrants.

Huh Yoon-hong, GS E&C’s president and the only son of the parent group’s Honorary Chairman Huh Chang-soo, has been leading the builder’s expansion into new businesses through acquisitions.

In January, Huh spearheaded the acquisition of three modular home builders, including Elements Europe in the UK and Danwood in Poland, for which the company spent about 180 billion won ($160 million).

Still, doubts remain over whether GS E&C will be committed to completing the stake deal, given its ownership structure and Infracore’s legal dispute with financial investors in relation to its Chinese unit.

About 20 family members surnamed Huh hold a combined 24% of GS E&C, which may make it difficult to go ahead with a deal worth close to one trillion won, the sources cautioned.

In the case of the auction for Asiana Airlines Inc., GS E&C showed interest in the early-stages of sale process but ultimately pulled out.

GS E&C reported third-quarter operating profit of 210.3 billion won on revenue of 2.3 trillion won.

Write to Junho Cha at chacha@hankyung.com

Yeonhee Kim edited this article.

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