Daewoo International Jumps on Report of Posco Offer

Daewoo International Corp. rose the most in seven months in Seoul trading after South Korean media reported Posco may be the preferred bidder for the trading company with a 3.4 trillion won ($3 billion) offer. Posco, Asia’s third-biggest steelmaker, is the front runner for a controlling stake in Daewoo International because its bid is higher than Lotte Group’s, the Chosun daily newspaper reported today, without citing anyone.
Posco offered 3.4 trillion won for Daewoo International, trumping Lotte’s 3.2 trillion won bid, Internet news provider MoneyToday reported May 8, citing people with knowledge of the deal. Both companies are seeking the entire 68.15 percent stake in the company that’s up for sale, MoneyToday said.
“Investors view that a takeover by Posco would be more positive for Daewoo International’s shares in the near term,” said Chung Yon Woo, an analyst with Daishin Securities Co. in Seoul. “Daewoo’s business is directly linked to Posco as it trades the company’s steel products while it has little relationship with Lotte.”
An acquisition by Posco would be more favorable for Daewoo International because of potential “synergies” with the steelmaker, Park Jong Ryeul, an analyst at HMC Investment Securities Co., wrote in a report on May 7.
Daewoo International shares climbed as much as 6 percent to 37,550 won on the Korea Exchange, the biggest gain since Oct. 7. The shares were up 2 percent as of 11:05 a.m. The benchmark Kospi stock index added 1.3 percent.
Acquisition Priority
Posco and Lotte last week submitted final bids for Daewoo, which trades steel, crude oil, cement and auto parts and is leading a natural gas project in Myanmar.
Posco Chief Executive Officer Chung Joon Yang, spearheading a $30 billion overseas expansion, called the trading company a “top” acquisition priority.
Choi Doo Jin, a spokesman for Posco, said today he’s unable to confirm the reports. A Lotte Group spokesman said he cannot confirm them. Officials at Korea Asset declined to comment.
“We expect some synergies from the deal as Daewoo handles about a fourth of Posco’s steel exports and has raw-material development know-how as Posco seeks to boost mining assets,” said Shin Yoon Shik, an analyst at Meritz Securities Co. in Seoul. The reported bid price looks “not that expensive, so won’t have a negative impact on the stock.”
Posco shares climbed 1.1 percent to 477,500 won.
The Korean mill last month said it plans to invest about $5 billion on overseas mines, joining rivals scouring the globe for iron ore and coal supplies as raw-material costs jumped.
State-controlled Korea Asset Management Corp., leading the sale as the biggest shareholder of Daewoo International, said last week it plans to select a preferred bidder this month.