South Korea’s large conglomerate Doosan Group will open a final tender for its defense unit Doosan DST, which is estimated between 600 billion won ($514 million) and 700 billion won, on Friday, according to the investment banking industry sources on Sunday.

The sources said the group and its sale advisor Credit Suisse aim to launch the final auction for a 100 percent stake in Doosan DST held by Doosan Group (51 percent) and financial investors - IMM Private Equity and Mirae Asset Private Equity (49 percent) on Mar. 25. The market estimates the sale price of the defense unit between 600 billion won and 700 billion won.

Four to five contenders are shortlisted, including strategic investors such as Hanwha Techwin Co. and LIG Group, as well as private equity funds such as MBK Partners and IBK Securities Co. PE, according to the sources. “For now, strategic investors - Hanwha Techwin and LIG Group - show a strong will to buy the defense company,” an unnamed official of an investment bank said, adding, “Given limitations in obtaining information about Doosan DST that is a defense firm, the two strategic investors that have already entered the defense industry have gained the upper hand in access to the firm’s information.”

The industry observers also note that if MBK Partners buys Doosan DST, it would be able to create synergies between the defense firm and Doosan’s machinery tool operation that it recently acquired from Doosan Infracore Co. Doosan’s machinery tool business and Doosan DST were spun off from now-defunct Daewoo Heavy Industries & Machinery, and they are closely related in business. MBK Partners with ample funds is considered a strong contender, but it would not be easy for the financial investor to enter the bid without a strategic investor because it is necessary to undergo reviewing process to obtain approval from the government to run a defense business.

For now, the most important factor that is expected to determine a final winner in the upcoming auction is how sincere a candidate is about acquiring and running the defense firm, rather than a bidding price, the sources said.

By Kang Doo-soon, Han Woo-ram

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