Morgan Stanley Private Equity and the consortium of Socius Advisors and Well to Sea Investment have both been shortlisted as potential buyers for Doosan Corporation Mottrol in a rare move by Doosan Group creditors aimed at speeding up the deal.
The two bidders have been told verbally that they were selected but neither has been officially named as the preferred buyer, sources said on Wednesday (July 29). This is unusual in an auction, as the seller typically names one bidder as the preferred buyer after the final bidding round, giving it the right to enter into exclusive negotiations.
Doosan Group, which is under pressure from creditors to restructure its businesses, wants to complete the sale of Doosan Corporation Mottrol by the end of the year. This means Doosan will need to consider various factors other than pricing to make sure the deal closes without any delay, industry watchers said.
Morgan Stanley Private Equity has reportedly made a higher offer than the rival consortium, but will be at a disadvantage because the acquisition of Doosan Corporation Mottrol will be subject to government approval due to the company having defense operations as well as its main business of hydraulic components. Morgan Stanley Private Equity could face more regulatory scrutiny as it is a foreign buyer.
The U.S.-based firm is also said to have demanded due diligence on the target’s Chinese entity, Doosan Mottrol Jiangyin Co Ltd, which is included in the sale. Doosan Mottrol Jiangyin was founded 10 years ago to capitalize on the fast-growing Chinese hydraulic equipment market, but its revenue and earnings growth have fallen short of expectations.
Socius Advisors and Well to Sea Investment are expected to have an edge, as they both are domestic firms and should easily win government approval. But industry watchers said their consortium is unlikely to outbid Morgan Stanley Private Equity.
“The selling side appears to have wanted to negotiate with both bidders individually,” an industry watcher said. “After further negotiations, one of them will likely be named as the preferred bidder.” (Reporting by Ar-rum Rho and Ik-hwan Choi)