South Korea’s Doosan Heavy Industries & Construction Co Ltd, a key affiliate of the cash-strapped Doosan Group, plans to kick off an auction process for Doosan Infracore Co Ltd later this month as part of the group’s restructuring plans, sources said on July 17.
As widely expected, Doosan Infracore’s controlling stake in Doosan Bobcat Inc, one of the global players of the compact equipment industry, has not been included in the sale plan. The Doosan Group reportedly plans to start the sale process first before spinning off a 51% Doosan Bobcat stake from Doosan Infracore. Credit Suisse is advising on the sale.
“Credit Suisse appears to distribute a teaser and information memorandum (for Doosan Infracore) before the end of July,” an industry insider said. “The sell-side hopes for a speedy sale.”
However, many industry watchers are skeptical about whether Doosan Infracore will attract interest from potential buyers as its stake in Doosan Bobcat, which is a key subsidiary of the company, has been left out of the sale. Doosan Bobcat accounted for 62.9% of Doosan Infracore’s revenue from the construction equipment business in 2019 on a consolidated basis. There are also concerns over litigation risk involving the ongoing legal battle between its subsidiary Doosan Infracore China Co Ltd (DICC) and DICC’s financial investors.
It is rumored that the Doosan Group proposed to creditors a sale of Doosan Bobcat by the first half of the next year. This speculation will further reduce the attractiveness of Doosan Infracore, industry watchers said.
“We have recently received increased inquiries from domestic and foreign investors about a possible sale of Doosan Bobcat,” an official from one advisory firm said. “Doosan Infracore separating its stake in Doosan Bobcat would make the company significantly less tempting to potential buyers.”
A private equity firm official said: “Several PE firms will likely take an information memorandum (for the sale of Doosan Infracore) to conduct a preliminary due diligence, but it is unclear whether the sale will prove to be a success.” (Reporting by Hye-ran Kim and Byung-yoon Kim)