Daewoo Merger Postponed Indefinitely

The selection of the preliminary bidder for the takeover of Daewoo Engineering & Construction has been postponed indefinitely.

The Public Fund Oversight Committee wished to select the preliminary negotiator for the takeover, but during the plenary meeting on Tuesday, the Disposal Review Subcommittee requested more time.

Chairman of the Public Fund Oversight Committee Park Yeong-cheol (professor of the Graduate School of International Studies at Seoul National University) said, “The Disposal Review Subcommittee requested more time, and we decided to grant its request. No other matter was discussed during the plenary meeting.”

Spokesman Lee Jong-jin of the Korea Asset Management Corporation (KAMCO), which is managing the sale, said, “We brought up this as an emergency agenda, because it is very sensitive. We decided to bring up the case one more time, because the case requires much consideration, as the whole nation is eyeing the developments.”

The Chairperson of the Disposal Review Subcommittee Park Sang-yong (professor at Yonsei University) said, “Because there was a need for confidentiality, the subcommittee did not have enough time to review the case put forth by KAMCO.”

“There are no problems with the case itself. We just wanted to be more careful. The date of the next meeting has not been decided, but I am sure that the selection will be over in two or three days.”

The Public Fund Oversight Committee is planning to hold another plenary meeting with the Disposal Review Subcommittee to select preferred bidder.

KAMCO said, “The date of the Disposal Review Subcommittee meeting and the plenary meeting has not been chosen. The announcement date of the preferred bidder has not been decided either. We will announce the schedule as soon as the Public Fund Oversight Committee members decide.”

The Public Fund Oversight Committee had been planning to select and announce the preferred bidder at 3:30 p.m., Tuesday, based on the valuation basis proposed by KAMCO.

Instead, the plenary meeting started at 2:20 p.m. and after a break, continued for two and a half hours without a conclusion.

Kumho Asiana Group, which presented the highest bidding price at 6.60 trillion won, had outbid the four other consortiums, and had been viewed as the most likely candidate.

It turns out that Kumho Asiana Group had prepared a press release stating that it would continue to use the Daewoo brand, instead of merging the company, if it acquires it.

A heated discussion took place during the meeting, when the Disposal Review Subcommittee members expressed unhappiness regarding the added valuation basis clauses.

The clauses, that they were upset over, imposed demerit marks for corporations that were targets of criticism and extra points for corporations with prior M&A experience of over 50 billion won, and whether it owns a construction company or not.

As new clauses were introduced, so were rumors that KAMCO is trying to give a boost for a certain company and that a company had already been selected as the acquisition candidate – causing some Disposal Review Subcommittee members to request another deliberation.

Public Fund Oversight Committee member Kang Man-soo (President of Seoul Development Institute) said, “We did not choose a particular deadline for the selections, because we did not want to give the impression that we are pressuring anyone.”

“Our conclusion could end up resembling the rumors that are going around. In this case, we have to persuade the people that it is just a coincidence. In this regard, we need enough time to work more reasonably,” he added.

Jin-Young Hwang Sang-Hoon Kim buddy@donga.com sanhkim@donga.com