Contrary to earlier expectations, the prospect of the sale of Daewoo Engineering & Construction Co. (Daewoo E&C) has become uncertain after only one candidate, its smaller local rival Hoban Construction Co., submitted a bid to buy a 51 percent stake in the builder at 1.6 trillion won ($1.5 billion) below the asking price.

According to multiple industry sources on Friday, state-run Korea Development Bank (KDB), the main creditor and stakeholder of Daewoo E&C, closed a main bidding for the construction firm and Hoban Construction was the only bidder. Hoban Construction is known to have proposed 1.6 trillion won for a 50.76 percent stake put up for sale, which is half of 3.2 trillion won injected by KDB and below 2 trillion won the creditor bank has been hoping to fetch from the sale.

Following the news, industry sources speculated that Hoban Construction might have proposed a split sale in the final bidding to buy 40 percent of the total stake up for grab and acquire the remaining shares three years later. The split purchase should help the sole bidder save on initial investment in its bigger competitor and share potential risk with KDB for a while, expected industry sources.

KDB remains silent on the result of the latest bidding and the speculation over the possible split sale proposal.

Amid growing uncertainty over the sale with a single bidder, an unnamed KDB official said that sole bidding is also valid and that the bank still aims to select a preferred bidder on Jan. 26. The state lender has been saying that it would select a preferred bidder after taking into consideration not only the sale price but also management sustainability and ability to raise funds.

The scene at the main auction was different from that of the preliminary bidding in November that was reported to have attracted 10 potential contenders. There have been rumors that some foreign energy companies have also showed interest in the Korean engineering firm that has a credible reputation in the Middle East and Southeast Asia and is strong in cutting-edge nuclear reactor technology. But it has turned out on Friday that Hoban Construction is the only bidder.

The state-run KDB in 2011 purchased the controlling stake in Daewoo E&C at 3.2 trillion won through a private equity fund to rescue debt-ridden Kumho Asiana Group, which took over the builder in 2006. The bank has been seeking to sell its 50.75 percent stake in Daewoo E&C plus management rights for about 2 trillion won. If it accepts Hoban Construction’s offer at about 1.6 trillion won, the creditor would lose more than half of what it injected in the builder.

If Hoban Construction succeeds in acquiring Daewoo E&C, it would make a big leap to become the third biggest construction company in Korea.

Daewoo E&C shares Friday ended up 4 percent, or 230 won, from a previous session at 5,960 won.

By Lee Seung-yoon and Lee Eun-joo

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]