[Yonhap News Photo]
SEOUL, Feb. 08 (Aju News) -- The sale of Daewoo Engineering & Construction, a major South Korean builder, was stranded in the shadows Thursday after Hoban Construction abandoned its bid, citing huge losses stemming from a troubled construction project in Morocco.
The state-run Korea Development Bank (KDB) selected Hoban Construction, a mid-sized builder, as a preferred bidder on January 31 to sell a 50.75 percent stake in Daewoo Engineering, which has been under a restructuring program.
A Hoban Construction official in charge of mergers and acquisitions said that in due diligence, his company encountered a series of problems such as "accidental losses" from Daewoo Engineering's overseas business.
"We have made a final decision to give up our bid" due to worries about whether Hoban Construction can cope with Daewoo Engineering's "present and future risks", he said.
Under the deal with KDB, Hoban Construction was to buy a 40 percent stake in Daewoo Engineering and acquire the remaining 10.75 percent stake two years later. The deal triggered allegations that the proposed price worth a total of 1.62 trillion won (1.49 billion US dollars) is too low.
Market watchers have expressed doubt about the financial ability of Hoban Construction to run a major international builder with sales estimated at 11 trillion won in 2016. Last year, Hoban Construction posted an estimated operating profit of 1.3 trillion won on sales of six trillion won.
Some 3.2 trillion won has been spent on keeping Daewoo Engineering afloat since KDB purchased its stake in 2010. It's been difficult to find a potential buyer mainly because of Daewoo Engineering's losses abroad.
Daewoo Engineering incurred an estimated loss of up to 400 billion won in the fourth quarter of last year from a two trillion won power plant construction project in Safi, Morocco. The loss would be included in its fourth-quarter earnings.
In the third quarter of 2017, Daewoo Engineering reflected losses from its projects in Qatar and Morocco.
reporter
Lim Chang-won
cwlim34@ajunews.com
