Military Mutual Aid Association to Participate in the Sale of Daewoo E&C

The sale of Daewoo Engineering & Construction (Daewoo E&C) will be starting full-scale.

The Military Mutual Aid Association (MMAA), the ‘big figure’ in the mergers and acquisitions (M&A) market inside the country, has officially announced their participation in the sale competition, and the creditors’ lawsuit, which had been a roadblock for Daewoo E&C’s sale, has been dropped.

According to related firms, MMAA’s CEO Kim Seung-kwang held a press meeting recently, and said, “We are currently considering whether or not to participate in the sales competition of some ten firms up on the domestic M&A market. We are especially interested in Woori Bank and Daewoo E&C.”

Relating to this, MMAA said, “We have currently been asked unofficially from two places to participate in the Daewoo E&C acquisition consortium.”

MMAA is the first to officially announce their participation in the takeover of Daewoo E&C.

Among the domestic construction firms, POSCO E&C and GS E&C, which have ample capital power, as well as Lotte E&C and Kumho Construction & Engineering, which has just gone through a successful restructuring, have been seen as possible firms for the takeover.

The takeover by U.S.-based construction firms Bechtel, Parsons and HRH was forecasted, but there were no detailed movements into the takeover.

Korea Asset Management Corporation (KAMCO), the biggest shareholder of Daewoo E&C, originally planned the sale for the first half of this year, but as no firms came out actively for the acquisition, the sale turned lukewarm.

In order for the takeover to be successful, a fund of some 1.5 trillion won is needed, and KAMCO and creditor financial institutions filed a lawsuit to meet the obligation worth $530 million (approximately 530 billion won), which affected the prolonged sale.

However, as KAMCO dropped the suit last April 26, the barricade is currently removed.

Experts are forecasting that if MMAA, which succeeded in its takeover of major firms such as Haitai Confectionary & Foods, Kumho Tire and Jinro based on an enormous capital power, jumps into the sale competition, the sale of Daewoo E&C will accelerate.

Jo Bong-hyeon, a researcher at Good Morning Shinhan Securities, said, “The lawsuit, which had been viewed as the biggest setback for the sale, has been settled, and if MMAA, with its ample capital power, actively gets involved, the sale process may be visualized within this year.”

However, KAMCO has amply raised the price of Daewoo E&C before its sale, and so the conclusion of the sale, some speculate, may be prolonged another year.

Jae-Seong Hwang imsoo@donga.com jsonhng@donga.com