Doosan Group’s successful restructuring is now up to Hyundai Heavy

16-Jan-2021 Intellasia | KoreaTimes | 6:02 AM Print This Post

Doosan Group’s efforts to sell its construction equipment unit Doosan Infracore and finish its restructuring programme now hinge on Infracore’s preferred bidder Hyundai Heavy Industries (HHI) Group, which holds the key to settling a Doosan-investor dispute over Infracore’s Chinese body.

The Supreme Court on Thursday reversed and remanded a Seoul High Court ruling which favoured the investors of Doosan Infracore China Co. (DICC) in a suit in which they demanded Doosan Infracore pay for losses worth nearly 1 trillion won, incurred by their failed exit from DICC.

DICC has been in a legal tussle with a number of investors such as Mirae Asset Private Equity, IMM PE and Hana Financial Investment PE. Those investors hold the right to force Doosan Infracore to join them and sell up to 80 percent of its stake in DICC, if DICC failed to launch its initial public offering (IPO) within three years of their investment in 2011.

As the IPO failed, the investors exercised their right to sell their DICC stakes, but this was also botched. The investors filed the lawsuit claiming Doosan Infracore obstructed the sales by not sharing relevant data, and the company should purchase the DICC stakes from them.

As the top court sides with Doosan Infracore, it was exempted from paying up to 1 trillion won, but this does not mean the disputes are settled because the investors still have a valid right to force Doosan to sell its DICC stake.

If the investors exercise this right, DICC could be sold to a buyer other than HHI. Since sales from DICC accounted for nearly 20 percent of Infracore’s total construction equipment sales in the first nine months of last year, an Infracore without DICC will be an unlikely match for HHI’s bid to become one of the top 5 global players in the construction equipment market, industry officials said.

To prevent this, either Doosan Group has to buy back the 20 percent stake in DICC from the investors or persuade HHI and the investors to let the new buyer to take care of this issue. The officials said the latter is more likely, because Doosan Group is now under a restructuring programme to improve its financial status and selling DICC alone is also a time-consuming task for the investors too.

“HHI wants to sign a sales and purchase agreement by the end of this month and close the Infracore deal within the first half of this year,” one of the officials said. “Since Doosan Group is striving to save every cost to finish its restructuring programme, chances are Doosan is more likely to persuade HHI to take this issue while purchasing Infracore and talk with the investors. This more realistic for investors too, because they have already experienced a failure in selling DICC by exercising their rights.”

HHI refused to elaborate over its deal, but an official at the group said it is in talks with Doosan over various terms and options for acquiring Infracore, and there will be no fundamental changes in its acquisition.

Since last year, Doosan Group has been selling its units and assets as part of its restructuring plan to create a cash flow of 3 trillion won in return for a bailout from the state-run Korea Development Bank (KDB). Thus far, the group has secured approximately 2.2 trillion won and is expected to keep its promise when it sells Infracore to HHI at around 800 billion won to 1 trillion won.


Category: Korea

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