Jungheung to use cash on hand for half Daewoo E&C’s takeover price Conglomerate’s civil engineering unit to lead the acquisition

Translated by Ryu Ho-joung 공개 2021-07-09 07:32:27

이 기사는 2021년 07월 09일 07:30 더벨 유료페이지에 표출된 기사입니다.

Jungheung intends to fund more than half the acquisition price for Daewoo E&C through available cash on balance sheets across its affiliates, as the construction conglomerate aims to complete the deal by the end of this year.

Jungheung will sign a memorandum of understanding with KDB Investment as early as the end of this month to carry out detailed due diligence before finalizing a deal to buy Daewoo E&C.

KDB Investment, the investment arm of state-controlled Korea Development Bank, earlier this week named Jungheung as the preferred buyer for its 50.75% of Daewoo E&C. The conglomerate submitted a final offer of 2.1 trillion won ($1.84 billion) last week.

Jungheung plans to fund about half the acquisition price through debt financing. It already secured about 900 billion won of financing commitments from KB Securities and Mirae Asset Securities.

In a press release on Tuesday, Jungheung said it intends to use a short-term bridge loan, which is expected to be repaid with cash flow in 2022. Observers said it could consider other options such as a term loan backed by shares in Daewoo E&C with no prepayment penalty.

The remaining amount of around 1.2 trillion won will be funded with cash on hand, with about two-thirds of them expected to come from the conglomerate’s civil engineering unit, Jungheung Civil Engineering & Construction. The company had cash and cash equivalents of over 500 billion won at the end of 2020.

Jungheung’s other affiliates, including Jungheung Building Construction, will provide the remaining amount. Jungheung Building Construction’s cash and cash equivalents were 140 billion won at the end of 2020.

Jungheung’s 2.1 trillion won offer was 200 billion won less than its original offer of 2.3 trillion won. The bid was lowered, and instead an indemnity clause intended to protect the company from potential losses from Daewoo E&C’s overseas business was deleted.

Jungheung and KDB Investment is said to have agreed on the price adjustment range of 3%, meaning the final acquisition price will be no less than 2.04 trillion won even if additional information about contingent liabilities is revealed during due diligence. (Reporting by Seon-young Kim)
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