KDB plans US$ 890 million rights issue for Daewoo E&C
By Chris Sleight01 November 2010
The state-owned Korea Development Bank (KDB) says it will raise KRW 1 trillion (US$ 890 million) in new capital to invest in Daewoo Engineering & Construction (E&C) once its acquisition of a stake in Korea's fourth-largest contractor is complete.
Last week saw Korea's Financial Services Commissions approve the acquisition of a 39.6% stake in the company at KRW 18000 (US$ 16.01) per share by KDB via two arm-s length investment companies, KDB Financial Group and Korea Finance Corporation. The total price for the stake was KRW 2.3 trillion (US$ 2.05 billion), which values Daewoo E&C at KRW 6.23 billion (US$ 5.17 billion).
KDB says it plans to issue new shares in the company once it has taken control, with a view to using the funds to build value before ultimately selling-on its stake. KDB Financial Group president Min Euoo-Sung said, "We are going to invest this capital in the engineering sector (of the company) and nurture Daewoo E&C as a global construction company like Hyundai E&C. I don't think it is right for KDB to hold Daewoo E&C for ever, so I am going to sell a stake in the construction firm by finding strategic investors after improving the company's market value."
"Daewoo E&C 's market price per share hovers around KRW 11000 to KRW 12000 (US$ 9.79 to US$ 10.68) so we need to raise the value of the firm," added Mr Min, with reference to the KRW 18000 (US$ 16.10) per share price tag KDB paid for its stake.
Daewoo E&C was ranked 55th in iC's 2010 league table of the world's largest contractors, with revenues of US$ 5.57 billion. It was the fourth largest Korean contractor in the listing behind Hyundai E&C (39th), Daelim (50th) and GS E&C (51st).