The Saudi government is interested in taking over South Korea’s Daewoo Engineering & Construction Co. (Daewoo E&C) which state lender Korea Development Bank (KDB) plans to privatize by the end of the year, sources close to the matter said Tuesday.
Senior government officials recently visited Seoul and were briefed on the construction company that is traditionally strong in the Middle East, the sources said. Both KDB and Daewoo E&C confirmed their visit.
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, the sources said.
The state bank has embarked on a due diligence on Daewoo E&C to assess its financial standing ahead of sales. Once its outside auditor Deloitte Anjin reviews and endorses last year’s fiscal settlements, the bank will draw up sales timetable.
KDB owns 50.75 percent in the country’s fourth largest builder through its private equity fund due to expire in October. The stake-holding is estimated at 1.28 trillion won ($1.12 billion) and the sale price could reach 1.5 trillion won to 1.7 trillion won including management right.
If realized, 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.
Shares of Daewoo E&C closed Wednesday at 6,270 won, up 2.28 percent or 140 won from the previous session.
By Yong Hwang-jin
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