Doosan Group has decided to split off Doosan Corporation Mottrol with the group expected to have to overcome some obstacles before closing the deal.

South Korea’s Doosan Group has recently decided to split off Doosan Co Ltd’s hydraulic components business unit Doosan Corporation Mottrol and make it Doosan Co’s wholly-owned subsidiary and sell Doosan Corporation Mottrol shares to a buyer, according to industry sources on July 6.

The seller sent out teaser letters to potential buyers of Doosan Corporation Mottrol and industry insiders before making a decision on the reorganization method, leaving the door open for split-off and business transfer. The seller has recently decided to split off the company and is reportedly preparing follow-up procedures.

Creditor protection procedure has to be taken when splitting off a company. It is a statutory procedure that the continuing company and the new company would not be bound to the joint liabilities of repaying debts. In case of objection for a split submitted by a creditor, the company may have to grant additional collateral or repay existing debts.

With complicated procedures waiting ahead, industry insiders expect the seller to speed up the remaining process to select a new owner of Doosan Corporation Mottrol. The final round of bidding is slated to take place next week, followed by selecting a preferred bidder, signing a stock purchase agreement and closing the deal.

“Doosan wants to close the deal by the end of this year but some industry insiders say the bidding process is on a tight timeline,” said an industry source.

Doosan Corporation Mottrol is one of the affiliates and business units that have been put up for sale by Doosan Group in an effort to address its cash needs. More than 10 potential buyers received teaser letters from the seller and several mid-sized private equity firms reportedly submitted letters of intent.

Although some potential buyers walked away from the deal while conducting due diligence in a virtual data room, multiple potential buyers, including a Chinese strategic investor, are currently mulling over possible participation in the final round of bidding. (Reporting by Ar-rum Rho)