South Korea’s state-run Korea Development Bank (KDB), the largest shareholder of Daewoo Engineering & Construction Co. (Daewoo E&C), is embarking on procedures to put the builder on the sale block early next year with hopes to fetch at least $1 billion for the majority stake it had bought in late 2010.

KDB, which is under government pressure to shed stakes in non-financial units, will seek board approval this week on the plan to invite bidders and conduct due diligence on the country’s fourth largest builder within the year so that they would be ready to make bids early next year.

The sale process will kick off upon approval from the board on the offering of a 50.75 percent stake the state lender holds in the builder through a special purpose fund dubbed KDB Value VI it created to acquire the shares from Kumho Asiana Group that ran into liquidity crisis in late 2010 for 2.2 trillion won ($1.9 billion). The state bank spent additional 1 trillion won to purchase rights offering, making its total investment in Daewoo E&C come at around 3.2 trillion won.

KDB has set up a private equity fund to purchase the majority stake because of the current law that prevents a bank from directly owning a non-financial asset. The fund expires in October next year. From Friday’s closing of Kospi-listed Daewoo E&C shares, the 50.75 percent stake would be worth slightly over 1.3 trillion won.

The state lender plans to pursue with the sale plan even at the risk of losing close to $1 billion as it helps neither the bank nor the company under current arrangement. Despite its reputation abroad for construction abilities, the management of Daewoo E&C has been unstable since the collapse of Daewoo Group in 1999. The company was bailed out by the government, privatized after it was purchased by Kumho Group in 2006, and then again returned to public ownership four years later.

The state bank is expected to seek foreign buyers for the company as few at home would afford the stake under current slowdown in domestic economy and foggy construction market prospects.

Creditors were finally able to sell Ssangyong Engineering & Construction Co. to the Investment Corporation of Dubai (ICD) in 2015 after seven failed attempts.

Daewoo E&C ranks fourth in terms of orders at home and posted a net profit of 146.2 billion won last year. Its operating profit amounted to 334.6 billion won on sales of 9.87 trillion won. It has won new orders worth 13.7 trillion won.

As of 1:00 p.m. Monday, Daewoo E&C shares rose 2.2 percent to 6,520 won.

By Hong Jang-won

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]