South Korea’s Doosan Group is to sell its stake in Doosan Infracore, the country’s biggest construction equipment maker, to repay government aid to its Heavy Industries & Construction (I&C) division.
Doosan Heavy I&C, which makes power equipment, received $3bn in emergency aid from the state-owned Korea Development Bank (KDB) and the Export-Import Bank of Korea to keep its engineering arm, Doosan Engineering & Construction (E&C), afloat. The deal was contingent on Doosan selling assets to repay the money at a later date.
The loan was necessary after Doosan E&C suffered huge losses from unsold apartments and Doosan Heavy I&C was hit by a government decision to cancel thermal power stations and nuclear reactor projects as part of a shift to renewable energy.
Doosan Corporation, the group’s holding company, has engaged Credit Suisse to arrange the sale of Doosan Heavy I&C’s 36% stake in Doosan Infracore. Infracore has a market capitalisation of about $1bn, and the sale is expected to make about $660m.
Other subsidiaries to be sold include Doosan Solus, which makes parts for batteries, and Doosan Tower, which makes hydraulic components. However, up until now investors have shown little interest in these offers, and some commentators have raised doubts about the appeal of Doosan Infracore, as it excludes the Bobcat unit, which accounted for 63% percent of Infracore’s operating profit last year.
Doosan Bobcat, which is based in the US, also makes construction equipment. The group holds a 51% stake in it.
A non-binding agreement signed between the group and the lenders means if the group fails to meet its repayments the creditors will take control of Doosan’s rescue plan and liquidate assets regarded as valuable, including Bobcat.
One source at the KDB told The Korea Times: "It seems clear that Doosan does not want to sell Bobcat due to its growth potential, but the low valuation of Doosan Solus and other saleable assets will pressure the group to eventually unload its Bobcat stakes."
Image: Doosan’s 40-tonne DX380LC crawler-excavator was recently fitted with 5G remote-control technology (Doosan)