South Korea’s POSCO, the world’s fourth largest steelmakers, is the favourite to buy a controlling $2 billion stake in Korean trading and resources firm, Daewoo International. Nine Korean financial institutions, including state-run debt clearer Korea Asset Management, are looking to sell a stake of between 50 percent plus 1 share and their entire 68 percent in Daewoo. It is understood that there other bidders for the company, including a consortium headed by a former executive of Daewoo.
POSCO said on Wednesday it had submitted a letter of intent ahead of a deadline to buy a stake in the company although it is not clear how much of the stake it is looking to buy. A source close to the deal said he expects POSCO to bid for the whole 68 per cent stake.
Last month POSCO said it would be spending $8.3 billion on investments and has earmarked a third of that for acquisitions.
Daewoo as a number of development projects, including a gas development in Myanmar and a nickel project in Madagascar as well as a 24 per cent stake in one of Korea’s leading life insurer, Kyobo Life. The company’s shipping arm already transports POSCO steel products however its iron ore trading activities makes it particularly attractive to POSCO as it seeks to shore up its raw material supply. Daewoo also ships base metals, auto parts and consumer electronics.
Daewoo’s corporate value is valued at around 5.4 trillion won (around $4 billion), some 50 per cent higher than its market capitalisation.
Daewoo is considered one of the most attractive acquisition targets this year as it focuses on development of buoyant oil, gas and resources, while its trading business should benefit from a global economic recovery.
Daewoo's resources portfolio includes an 8 trillion won ($6.9 billion) gas development in Myanmar and a nickel project in Madagascar. It also has a 24 percent stake in unlisted Kyobo Life, South Korea's No.3 life insurer.
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