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| Daewoo E&C headquarters in Seoul / Courtesy of Daewoo E&C |
By Kim Hyun-bin
Controversy is on the rise after Jungheung, a mid-sized construction firm that was chosen as the preferred bidder to acquire Daewoo E&C, allegedly threatened to back out of the acquisition process unless a rebid is conducted.
Jungheung Construction, based in South Jeolla Province, was selected as the preferred bidder after bidding 2.3 trillion won ($2.04 billion) to take over state-owned Korea Development Bank’s (KDB) 50.76 percent stake in Daewoo E&C. Jungheung Construction’s bid was 500 billion won higher than rival DS Networks Consortium’s offer of 1.8 trillion won.
KDB Investment (KDBI) chose to conduct a rebid of Daewoo E&C in order to continue with the acquisition and criticism is on the rise as it gives a “certain company” a chance to lower its bidding price. If Jungheung submits a lower bidding price than it suggested before, then the builder is expected to become embroiled in possible malpractice issues.
“Just a week after Jungheung submitted its bid, there is a rebid because they submitted an overpriced offer. The out of the ordinary decision for a rebid could only be seen as a preferential acquisition,” Daewoo E&C’s union said in front of the company headquarters in Seoul, Friday.
The two firms were advised Wednesday of the rebid just five days after Jungheung was chosen as the preferred bidder.
The rebid comes as KDBI believes Jungheung, which made an offer more than 500 billion won higher than DS Networks’, will not follow through with the acquisition as the deal seems overpriced compared to the market consensus and as 500 billion won is enough to acquire a mid-sized construction firm. But KDBI said the renewed process is not a rebid.
Officials in the banking industry said Jungheung “intentionally wrote” an overpriced bid due to the possibility of Hoban Construction taking part in the acquisition bid. In 2018, Hoban Construction was selected as a preferred bidder to buy a controlling stake in Daewoo E&C, but the company backed out at the last minute as Daewoo E&C suffered bigger losses in its overseas businesses.
However, the anticipation of Hoban taking part in the bid once again raised the stakes and the asking price of Daewoo E&C that led to Jungheung submitting its latest bidding price.
Daewoo E&C reported a first-quarter net profit of 147.9 billion won, up 138.9 percent year-on-year. Operating profit for the three months ending March 31 nearly doubled to 229.4 billion. Daewoo E&C’s stock price, which had been trading at around 9,500 won per ordinary share a month ago, was down 17 percent because of uncertainties regarding the sale process, according to analysts.
Rebid for Daewoo E&C sparks controversy
Source: Buhay Kapa PH
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