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Doosan Group Agrees to Sell 36% of Doosan Infracore to Hyundai Heavy Industries and Korean Bank

Dec. 13, 2020
Doosan Group has named a consortium of Hyundai Heavy Industries Holding and KDB Investment, a unit of the state-run Korea Development Bank, as the preferred bidder to acquire a 36.07-percent controlling ownership stake in Doosan Infracore Co.

Doosan Group has named a consortium of Hyundai Heavy Industries Holding and KDB Investment, a unit of the state-run Korea Development Bank, as the preferred bidder to acquire a 36.07-percent controlling ownership stake in Doosan Infracore Co. for nearly 900 billion won (about U.S. $827.8 million), according to Korean press reports.

The companies are planning to sign a share purchase agreement before the end of the year.

The deal, which has to be cleared by Korean anti-trust regulators, would make the new entity No. 1 among Korean construction equipment manufacturers, and in the top 10 globally.

The combination of Hyundai and Doosan Infracore would create synergies that would enhance both companies. According to Maeil Business News Korea Doosan has a strong presence in China with a 22.8-percent market share in the third quarter, while Hyundai Construction Equipment is believed stronger in emerging countries such as India and Russia.

Maeil Business News Korea reports that the deal could face obstacles because of anti-trust issues. Korean anti-trust regulations provide that a company with a market share higher than 50 percent is considered a monopoly and that the merged company would reach around 60 percent in Korea’s excavator market. According to reports, the companies are optimistic they would still gain regulatory approval.

Doosan Group is under pressure to divest assets because of its significant debt load. Last March, Doosan obtained 3 trillion won from its creditors, including the KDB, to help pay for its short-term debts worth 4.2 trillion won, which should be paid this year.

Ready-mix concrete manufacturer the Eugene Group also submitted a competitive bid for the Doosan stake.