MBK Partners, Glenwood Private Equity and a consortium of Hyundai Heavy Industries and KDB Investment have submitted preliminary bids for a stake in Doosan Infracore Co Ltd, the construction equipment manufacturing unit of Doosan Group.
Lead manager Credit Suisse accepted bids on Monday (September 28) for a 36 percent stake in Doosan Infracore. The bidding was initially scheduled for September 22, but delayed about a week due to an issue related to the exclusion from the sale of Doosan Infracore China Co Ltd (DICC). Doosan Infracore is locked in a legal battle with DICC’s financial investors.
Hyundai Heavy Industries reportedly obtained an assurance that Doosan Group would repay any additional debts of DICC before it agreed to take part in the bidding. It is believed that other bidders were given similar commitments.
Potential buyers have approached the deal cautiously, but are expected to participate in at least the first round of bidding to study the unit more closely. Major private equity (PE) firms that are sitting on piles of uninvested capital, known as dry powder, are showing strong interest in large transactions due to the absence of big-ticket deals in the domestic mergers and acquisitions market this year.
Hyundai Heavy Industries has a particular interest in the outcome of the Doosan Infracore sale, as its affiliate Hyundai Construction Equipment is a rival of the company, as well as Volvo Construction Equipment.
As expected, Hyundai Heavy Industries did not join the race on its own due to the high financial burden, instead forming a consortium with the investment arm of the state-run Korea Development Bank (KDB).
Doosan Group needs the sale to relieve cashflow pressures. In March its heavy industries subsidiary obtained a cash injection of 3 trillion won from creditors, including KDB, to cover short-term debts of 4.2 trillion won, which should be paid this year. (Reporting by Hee-yeon Han)