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Petronas, Aramco mull Daewoo E&C acquisition; deal to fetch $1.87 billion

The 50.75 percent Daewoo E&C stake is being put up for sale by state-owned Korea Development Bank

Reuters  |  Seoul 

Petroliam Nasional Bhd, petronas, Petronas logo, petrol kiosk, Kuala Lumpur
A worker cleans a Petroliam Nasional Bhd (Petronas) logo at a petrol kiosk in Kuala Lumpur. Photo: Reuters

firms and are among potential suitors for a controlling stake in Daewoo Engineering & Construction Co, a deal that could fetch around 2 trillion won ($1.78 billion), South Korea's Maeil Business Newspaper said on Friday.

The 50.75 percent Daewoo E&C stake is being put up for sale by state-owned Korea Development Bank (KDB), which in July said BoA Merrill Lynch and Mirae Asset Daewoo Securities have been appointed as its advisers on the deal. The stake was valued at 1.48 trillion won as of Thursday's closing price.

Malaysian company (Petronas) is considering acquiring the KDB stake, Maeil reported, citing unnamed investment banking sources and a source with knowledge of

Saudi Arabian giant is also interested in buying the stake, the paper said. An unidentified Chinese construction firm and an unnamed U.S. builder also expressed initial interest, it said, adding that United Arab Emirates' ADIC (Abu Dhabi Investment Council) may also be interested.

Petronas, and ADIC were not immediately available for comment. Daewoo E&C declined to comment.

A KDB spokesman also declined to comment on the report, but added that the notice to officially kick off the stake sale is expected to come by end-September. KDB said last year it would put up for sale stakes in its non-core units.

Daewoo E&C, South Korea's No.3 construction firm, posted a 140 percent jump in first-half operating profit to 467 billion won, and KDB has said it is expected to achieve positive earnings this year.

Its shares surged as much as 11 percent on Friday after the news of the potential stake buyers, and were trading up 5 percent at 0540 GMT.

For Petronas, an acquisition of the Daewoo E&C stake would be its biggest deal since 2012 when it bought Canadian firm Progress Energy for $5.87 billion.

CEO Wan Zulkiflee Wan Ariffin told Reuters last month that the company was looking to diversify its business, even considering investments in renewable energy, amid expectations that the low price environment will continue.

The Malaysian state energy firm has slashed spending, cut jobs and divested non-core assets over the last two years due to the decline in the Brent crude price, which is now less than half what it was in mid-2014.

In July, scrapped a proposed C$36 billion ($29 billion) liquefied natural gas project in western Canada due to weak prices, in a blow to its global ambition.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Fri, September 01 2017. 12:37 IST