Hyundai Cement Co. that has been under a workout program since 2010 is expected to be put up for sale this year. Despite its small market share, the upcoming sale of the cement maker is expected to bring about a change in the local cement market that is fiercely competed among seven players including Hyundai Cement.

According to the industry banking industry on Monday, state-run Korea Development Bank, the largest shareholder of Hyundai Cement, plans to dump its stake in the cement maker sometime during the latter half this year. With eased uncertainties over the so-called “Pi City” project, an indefinitely delayed mega construction project that the cement company extended massive amount of guarantees, after the sale of the project’s site to Harim Group in April, Hyundai Cement’s creditors are said to have decided to sell the company whose sale has been recommended since it was put under a workout program as soon as possible.

Currently, Korea’s cement market is dominated by seven major players that take up over 90 percent. Hyundai Cement accounts for 7.38 percent, ranking seventh, but its fate will likely be a game changer for the local cement industry that is tightly controlled by No. 1 and 2 - Ssangyong Cement Industrial Co. with a 28.8 market share and Hanil Cement Co. with 21.2 percent.

Hyundai Cement’s bid is expected to be a battle among private equity funds and cement makers. Korea-based PEF Hahn & Co. will likely be a probable bidder as it has emerged as a big player in the local cement industry after acquiring multiple cement makers including Ssangyong Cement, Daehan Cement Co. and Hannam Cement Co.

UAMCO (United Asset Management Company), a non-performing asset investment firm co-invested by six banks in Korea, also expressed its interest in the buyout. Many more candidates are expected to participate in the auction once its sale notice is released, industry observers said.

So far, none of cement makers have come forward to express their interest in Hyundai Cement, but Hanil Cement Co. and Asia Cement Co. with ample liquidity could be possible contenders. An unnamed official at Hanil Cement said nothing has been decided yet about whether it would participate in the possible auction for Hyundai Cement. The industry observers, however, note that a potential marriage of Hanil and Hyundai would create limited synergy effect due to overlapping factory locations of both companies.

The Korean cement market has been under restructuring in recent years amid a persistent oversupply caused after cement makers had competitively expanded their production during the heyday of the country’s construction sector a few years back. In the last two years, Tongyang Cement was acquired by Sampyo Group, Lafarge Halla Cement Corp. by Glenwood PE and Ssangyong Cement Co. by Hahn & Co.

Industry observers welcome the aggressive inroads of private equity funds into the local cement industry as their growing presence is expected to spur a cut-throat competition to reshape the whole market.

By Chung Soon-woo

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