South Korea’s Doosan Group is considering selling a major stake in Doosan Engine Co. held by Doosan Heavy Industries & Construction Co. as part of the group’s ongoing efforts to reshape a business portfolio of its units.

According to multiple sources from the industry on Monday, Doosan Group is in the process of selecting deal advisers for a possible sale of a 42.66 percent stake in Doosan Engine owned by its parent Doosan Heavy Industries & Construction along with managerial rights.

The divestiture of Doosan Engine will be formally discussed after the group’s compact construction equipment making unit Doosan Bobcat goes public on October 21.

Doosan Engine is dedicated to producing shop diesel engines, diesel and gas power generation and engine parts. Following the sale of Doosan Engine, Doosan Group is expected to put more weight on power generation plant, green energy and water treatment businesses.

Last year, Doosan Engine logged 63.8 billion won in operating loss on revenue of 693.6 billion won ($625.5 million). Good news is that the share of its low-profit back orders received before 2013 is declining. The company swung to profit in the first quarter of this year and anticipates more orders next year. Its order backlog stands at 1.8 trillion won at the end of June, and nearly half of the ship engine orders came from the country’s leading shipbuilders Samsung Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co. that are grappling with a prolonged slump in the global shipbuilding industry.

Doosan Engine’s financial health is expected to improve significantly on its proceeds from the upcoming initial public offering (IPO) of sister company Doosan Bobcat. Doosan Engine holds a 11.8 percent stake in Doosan Bobcat, of which the 4.1 percent stake will be sold along with the Doosan Bobcat IPO for some 200 billion won.

By Park Yong-bum, Kang Doo-soon

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