FSC looks into possible violations in Jungheung’s acquisition of Daewoo E&C

The headquarters of Daewoo E&C in central Seoul / Courtesy of Daewoo E&C

Deal faces mounting calls for an investigation

By Anna J. Park

Financial regulators are looking into whether a mid-sized construction company received preferential treatment in acquiring Daewoo Engineering and Construction (Daewoo E&C), which used to be one of Korea’s top builders.

The move follows suspicions raised by some lawmakers and unionized workers accusing Jungheung Construction of benefiting unfairly in it selection early last week as preferred bidder to acquire Daewoo E&C.

The Financial Supervisory Commission said Wednesday that it is currently looking into the deal to see whether there were any violations of the law, adding that it plans to thoroughly examine the case after being briefed on the sale by state-run Korea Development Bank (KDB), the parent company of KDB Investment (KDBI).

KDBI sold a 50.75 percent stake in Daewoo E&C to Jungheung. The mid-sized builder was selected as the preferred bidder in a controversial second round of bidding early last week to purchase Daewoo for 2.1 trillion won ($1.8 billion). Jungheung offered to buy Daewoo E&C for 2.3 trillion won in the first round of bidding at the end of last month.

FSC Chairman Eun Sung-soo told a National Assembly meeting on the previous day that the financial regulator will investigate if any laws were broken.

“The case is currently being investigated by KDB, but the FSC will also take a look into the matter (to see whether there was preferential treatment,” said Eun during the parliamentary meeting on Tuesday.

During that session, three-term opposition lawmaker Yun Jae-ok voiced strong suspicion, saying KDBI made an unprecedented case of accepting a bidder’s request to discount the offered price, after the main bid ended. The lawmaker also accused KDBI of being in a rush to sell Daewoo E&C, taking only 25 days from the appointment of an underwriter for the sale to the main bidding process. Yun said it was an excessively speedy process compared to a failed attempt to sell Daewoo E&C back in 2017, when it took six months to select a preferred bidder.

Financial Services Commission Chairman Eun Sung-soo speaks during a parliamentary committee meeting at the National Assembly in Seoul, Tuesday. Yonhap

A civic group is also voicing its suspicions over the sale. The People’s Solidarity for Participatory Democracy asked KDB to looks into the matter, criticizing KDBI’s unilateral decision to accept the bidder’s request to discount the price after the bid ended.

“KDB spent some 3.2 trillion won to take over Daewoo E&C over the years. Considering the public money spent on it, the state-run bank will not be free from being held responsible for wasting taxpayers’ money if it’s true that its subsidiary KDBI discounted 200 billion won from the original bidding price simply because the bidder ― Jungheung Construction ― asked to do so,” the civic group said.

A KDB official said it will take a while for the investigation results to come out.

“KDB is closely looking into the process of the bidding, whether the subsidiary ― KDBI ― performed it without having any legal violations. KDB plans to share the investigation results with FSC. It’s not certain for now when the final result will be available,” an official from KDB told The Korea Times.

Because of the ongoing investigation, the follow-up process of signing an MOU between Jungheung and KDBI is expected to be delayed.

“We cannot confirm any timeline forward about the MOU signing and follow-up measures of selecting the preferred bidder,” an official from KDBI told The Korea Times over the phone.

Meanwhile, Daewoo E&C’s labor union is planning to vote from Thursday to next Monday on whether they should hold a general strike to protest the sale.

FSC looks into possible violations in Jungheung’s acquisition of Daewoo E&C
Source: Buhay Kapa PH