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Saudi plans to acquire South Korea’s Daewoo E&C

by Jochebed Menon on Feb 16, 2017

Daewoo E&C has been traditionally strong in the Middle East.
Daewoo E&C has been traditionally strong in the Middle East.

The Saudi government has shown interest to buyout South Korea’s Daewoo Engineering & Construction Co (Daewoo E&C).

State lender Korea Development Bank (KDB) plans to privatise the builder by the end of the year, sources close to the matter said, according to South Korean publication, Pulse. 

Senior government officials recently visited Seoul and were briefed on the construction company that is traditionally strong in the Middle East. 

Saudi officials are reportedly considering various means to arrange the acquisition.

The purchase could be made through one of the two sovereign wealth funds Public Investment Fund (PIF) or Saudi Arabian Monetary Agency (SAMA), or state-run oil firm Aramco, or by S-Oil, a Korean unit of Aramco.

International oil price movement could be a determining factor as Saudi relies on oil money to make investment, sources said.

The state bank has embarked on a due diligence on Daewoo E&C to assess its financial standing ahead of sales.

KDB owns 50.75% in the country’s fourth largest builder through its private equity fund, due to expire in October 2017.

The stake-holding is estimated at $1.12bn (KRW1.28tn) and the sale price could reach $1.31bn (KRW1.5tn) to $1.50bn (KRW1.7tn) including management right.

If the deal goes through, it would make the second Korean construction company to fall under Middle East ownership.

Ssangyong Engineering and Construction (Ssangyong E&C), which was Korea’s 19th largest builder, was acquired by the Investment Corporation of Dubai (ICD), the investment arm of Dubai government, in 2015.

The South Korean builder reported net losses of $692m (KRW794bn) in 2016, as it put aside reserves against potential losses related to overseas projects.