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Mon, Jun 29, 2009 - Page 10 News List

Kumho Asiana Group to sell stake in builder Daewoo

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Kumho Asiana Group will sell control of Daewoo Engineering & Construction Co to ease financial strains less than three years after acquiring South Korea’s biggest builder.

The industrial group will consult advisers and creditors to plan the sale of as much as 72 percent of the Seoul-based contractor, Kumho said yesterday in an e-mailed statement. The stake, with a market value of 3 trillion won (US$2.34 billion) as of Friday, was purchased in 2006 for 6.43 trillion won.

Daewoo Engineering shares probably won’t gain enough from Kumho’s announcement to relieve investor concerns that the industrial group may not be able to meet obligations, said Kang Kwang-sook, a Seoul-based analyst at HI Investment & Securities Co. Kumho guaranteed a premium on shares it granted to the lenders who financed the acquisition.

“It would be pretty hard to find any buyer willing to purchase Daewoo shares for more than Kumho paid, given the economic and industry circumstances,” Kang said yesterday by telephone. “A sale won’t completely erase concern over Kumho Asiana’s overall liquidity.”

The creditors, who hold a combined 39 percent of Daewoo, have the option to sell their holdings back to Kumho at the end of this year for 32,000 won a share, 22 percent more than the group paid. Daewoo stock has fallen 51 percent since the acquisition, to close June 26 at 12,850 won.

Kumho, which also owns Asiana Airlines Inc, said it plans to sell Daewoo through an open auction and will consider selling shares to a private-equity fund set up by Korea Development Bank, its main creditor.

State-run Korea Development’s chief executive officer Min Euoo-sung said last month the fund will buy assets from companies short of cash, and share any profit with the original owners.

Kumho Asiana is to sign an agreement with creditors by the end of next month, spelling out how to improve its finances.

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