Doosan Corporation may sell its forklift manufacturer Doosan Corporation Industrial Vehicle to Doosan Bobcat, industry sources said on Tuesday (February 23).

Doosan Corporation Industrial Vehicle is the cash cow of Doosan Corp, averaging revenue of one trillion won ($900 million) in recent years, with an operating margin of 5–6%. It recorded revenue of 596.7 billion won in the first three quarters of last year, an operating income of 29.5 billion won and an operating margin of around 5%, despite fallout from the Covid-19 pandemic.

In selling the business to the unit, Doosan Group has shown its intention of increasing Doosan Bobcat’s enterprise value. “If the forklift business moves to (Doosan) Bobcat, it will create quite strong synergies as it could use Bobcat’s networks in the U.S. market and its brand name,” said an industry source, adding, “It will also help the business to grow, which will lead to an increase in Bobcat’s enterprise value.”

Doosan Bobcat is a flagship subsidiary of Doosan Infracore, which is a subsidiary of Doosan Heavy Industries & Construction. Doosan Bobcat is likely to become a subsidiary of Doosan Heavy Industries when the sale process for Doosan Infracore is completed. If Doosan Bobcat takes over the forklift business, it is highly likely to develop into a reliable cash cow for its parent Doosan Heavy Industries, thanks to high dividends through a strong cash-generating capability.

Some market insiders noted that the deal is a preemptive move for the group to sell Doosan Bobcat. “The key of the Doosan Group’s restructuring plan is to offload companies that don’t fit with Doosan Group’s business portfolio,” said one industry source, adding “Just like Doosan Infracore, which was a cash cow but sold by Doosan Group, the forklift business is also not related to the eco-friendly energy business that Doosan is pursuing.”

Assuming Doosan Infracore does sell Doosan Bobcat, the sale of Doosan Corporation Industrial Vehicle will allow the group to hand over its non-core business to a company that will soon be sold and retrieve cash from the company. Doosan Corporation Industrial Vehicle is likely to fetch hundreds of billions of won, given its total assets of 670 billion won and business capabilities. Doosan Corp could use the money from the sale to expand its hydrogen fuel cell business.

Even if Doosan Bobcat remains under Doosan Infracore, cash will still be injected into Doosan Corp through the sale of the forklift business and Doosan Bobcat’s enterprise value will further increase from taking the lucrative business.

“It is unclear whether Doosan Group will sell Doosan Bobcat immediately because it has already offloaded a lot of companies with cash-generating capabilities during its restructuring process,” said an industry source.

“However, the possibility of the sale of Doosan Bobcat can’t be underestimated for the group to achieve the goal of its rescue plan and raise financial resources to invest in its eco-friendly energy business in the future.” (Reporting by Ki-soo Park)