As temperatures finally start to rise in Korea, the M&A market might also be heating up according to the article ‘Flurry of mergers on horizon‘, in Korea’s JoongAng Daily.
The article bases the argument on the greater than expected interest in Daewoo International, which saw four entities submit bids, when many thought Posco would be the sole bidder.
Excerpts from the story include -
Competition among local companies to snap up other firms or initiate mergers is expected to heat up in the coming weeks and months, as several conglomerates have already expressed strong interest in purchasing struggling companies.
Four entities, including top steelmaker Posco and retail conglomerate Lotte Group, filed letters of intent to acquire an ownership stake in Daewoo International by a Wednesday deadline.
Daewoo Partners Consortium – a private equity fund formed by former Daewoo Group executives – also submitted a bid. The identity of the remaining bidder has not been released, but sources say it’s likely a private equity fund.
Lotte has been aggressively expanding its business through M&As. This year alone, it has already purchased the convenience store chain Buy the Way for 274 billion won ($236 million) and both GS Square and GS Mart for 1.34 trillion won.
The group has also been eager to expand its overseas network. Acquiring Daewoo International could help in that respect, creating synergy with Lotte’s trading unit and other existing businesses.
The Korea Asset Management Corporation (Kamco), Daewoo International’s leading shareholder, is managing the sale process, which involves unloading stakes held by several groups.
Kamco holds a 35.5 percent ownership stake in Daewoo, while the Export-Import Bank of Korea has 11.2 percent, KDB Asset Management has 7 percent and the Korea Development Bank has 5.2 percent. The sale involves a 50 percent ownership stake in Daewoo plus one share, which will give the buyer ownership control.
The stake is currently valued at 2.6 trillion won, based on Daewoo’s closing stock price of 36,300 won yesterday.
The competition is fiercer than some observers initially thought.
“With more bidders, the sales value of Daewoo International will be higher,” said one market watcher who wished to remain anonymous.
Kamco plans to choose a preferred bidder by May.
Industry experts say the sale of Daewoo International could accelerate merger and acquisition activity involving other companies that are currently on the block, such as Daewoo Engineering and Construction and Hynix Semiconductor.
Click on the company names for more information regarding the sales of Daewoo International, Daewoo Engineering and Construction, and Hynix Semiconductor.
(Source: JoongAng Daily)
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