Doosan Infracore tender draws bids from Hyundai Heavy, top-tier PEFs

Doosan Infracore

The tender for Doosan Infracore Co. drew big-name players including Hyundai Heavy Industries Group and top-tier private equity funds, raising the chance for parent Doosan Group to get a good price for its prized company whose appeal was heightened through removal of litigation risk.

According to Doosan Group and sales advisor Credit Suisse, the tender on Monday received preliminary bids from Hyundai Heavy Industries Holdings Co. and multiple private equity fund managers including MBK Partners and Glenwood Private Equity.

Up for sale is a 36.27 percent stake in Doosan Infracore owned by Doosan Heavy Industries & Construction Co. The company’s 51.05 percent stake in Doosan Bobcat, the U.S.-based construction equipment maker, is not included in the deal.

The deal previously was estimated at 700 billion won ($600 million) but its value has gone up after Doosan announced earlier this month that it will assume all contingent liabilities related to Doosan Infracore China Co.

Hyundai Heavy Industries Holdings poses as the strongest contender. The holding company of namesake business conglomerate with its own heavy equipment unit Hyundai Construction Equipment Co. took part in the auction in a consortium with Korea Development Bank Investment, a unit of state-run Korea Development Bank, contrary to its earlier denial of interest.

When Maeil Business Newspaper reported in early September that Hyundai Heavy Industries was reviewing its participation in a bid to buy Doosan Infracore, it publicly denied of the report or having any interest in acquiring Doosan Infracore.

But it joined the race in a consortium to lessen the financial cost after the litigation risk was lifted.

If Hyundai Construction Equipment is combined with Doosan Infracore, the merged entity could leapfrog to command fifth or sixth over the global construction equipment market.

Currently, the global heavy equipment market is dominated by Caterpillar of the U.S. and Komatsu of Japan, with 12.6 percent and 11.9 percent shares, respectively. Following the two are John Deere, Hitachi Construction Machinery, and Volvo Construction Equipment with shares hovering around 5.5 percent, each. Hyundai Construction Equipment currently stands No. 20 with a 1.5 percent share while Doosan Infracore is ranked at ninth with a 3.7 percent share.

Hyundai Construction Equipment could easily jump to join the top 10 if it brings Doosan Infracore under its wing. It would also be able to expand its international presence, especially in China where Doosan Infracore topped among foreign makers this summer.

Hyundai Heavy Industries’ merger however could raise antitrust issues at home. Doosan Infracore accounts for bout 40 percent of the heavy equipment market and Hyundai Construction equipment about 25 percent.

On Tuesday, Doosan Infracore shares closed 3.94 percent lower at 8,770 won, and Hyundai Construction Equipment down 1.12 percent 26,500 won in Seoul.