Korea Development Bank fund to buy Daewoo E&C

By Chris Sleight11 May 2010

The state-owned Korea Development Bank (KDB) has announced plans to buy a controlling stake in Daewoo Engineering & Construction for KRW 2.9 trillion (US$ 2.6 billion).

The buy-out via a new private equity fund is designed to help restructure the troubled Kumho Asiana Group, which currently owns a controlling stake in the contractor.

KDB is currently completing due diligence on the purchase, and expects to close the deal to buy 50% plus one share in Daewoo E&C in July. The bank will set up an independent fund through which it will finance the deal.

Companies that have expressed an interest in contributing to the fund in exchange for a stake include Korean steel maker Posco, TR America - a consortium of US-based construction companies - and STX Group, a Korean conglomerate.

Kumho Asiana put its stake in Daewoo E&C up for sale last year, but failed to find a buyer, although STX Group and TR America are reported to have shown interest.

The failure to sell saw Kumho Asiana enter a creditor-led debt restructuring plan on December 30. It was at this point that KDB stepped in with an agreement to buy the contractor.

Daewoo E&C was ranked 60th in iC's 2009 league table of the world's largest contractors, with revenues of US$ 6 billion. It was the fourth largest Korean contractor in the listing behind Hyundai E&C (39th), Daelim (42nd) and GS E&C (51st).

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