Jungheung to become 3rd Korean manufacturer after Daewoo E&C takeover
A rendered image of Daewoo E&C’s Starlake City project in Hanoi, Vietnam. (Daewoo E&C)
The acquisition by construction conglomerate Jungheung Group of much larger rival Daewoo Engineering & Construction on December 9 is expected to make Jungheung the third largest builder by asset in South Korea, after Samsung E&C and Hyundai E&C.
While the two companies will manage management individually, the Jungheung Group said it will retain the staff and management of Daewoo E&C and ensure the manufacturer’s independence in management. The flagship apartment franchises of the two manufacturers, Prugio and Jungheung S-Class, will also operate separately.
Market experts believed that since the two companies have different strengths and capabilities in construction and engineering, such a management style will help companies to create synergy in the development sector. real estate, overseas projects, as well as strengthening brand awareness.
Founded in the southern city of Gwangju in 1983, Jungheung established its reputation through social housing projects such as the redevelopment of new towns in Gwangju and surrounding provincial areas, relying largely on orders from Korea Land and Housing Corp. The group has created up to 34 subsidiaries. in order to get as many orders as possible from the state housing corporation, as the orders were placed on the basis of a lottery-like process.
A rendered image of Daewoo E&C’s Al Faw Grand Port project in Iraq. (Daewoo E&C)
Since the early 2000s, Jungheung has expanded its territory to the Gyeonggi Province region to raise its profile as a high-end apartment builder with its Jungheung S-Class apartment brand.
In 2015, the Jungheung Group was recently added to the list of conglomerates in the country by the Korea Fair Trade Commission. Its total assets stood at 5.5 trillion won (US $ 4.6 billion), with sales of 3.2 trillion won at the end of 2014. Jungheung Group’s total assets grew. to 9.2 trillion won in 2020, making it the 47th largest company in Korea, according to the FTC. .
Following the acquisition of a controlling stake in Daewoo E&C, Jungheung will become the 21st largest conglomerate with around 19 trillion won in total assets, according to the industry.
While Jungheung has focused on housing projects locally, what they can gain from acquiring Daewoo E&C would be his experience in overseas projects.
Daewoo E&C, Korea’s six largest construction and engineering company, was once a major subsidiary of the former Daewoo Group, one of the country’s largest conglomerates in the 1990s. The manufacturer later became part of the group. Kumho Asiana, but has been on sale for years.
Key activities of Daewoo E&C include building its premium apartment brand Prugio as well as overseas plants for liquefied natural gas regasification and storage tanks.
Some of the large overseas projects include a 2.6 trillion won project in Vietnam for the construction of residential, commercial and government agency buildings on 2.1 million square meters of land in Starlake City in Hanoi, Vietnam. by 2024. The start of the project dates back to 1996 when Daewoo E&C proposed the new city project to the Vietnamese government.
Other ongoing projects include the construction of facilities for a large-scale port in Iraq valued at 2.9 trillion won. Named the Al Faw Grand Port project, Daewoo E&C will build a sea wall, connecting roads, a main canal, a tunnel, in addition to the previous agreements made for the same project in 2013.
For Daewoo E&C, the buyout is a solution to urgent liquidity needs.
Jungheung Group has promised that the first thing it will do after the acquisition will be to reduce Daewoo E&C’s debt ratio. Its debt ratio was 223% in the third quarter, well above that of competitors such as Samsung E&C (64%), Hyundai E&C (104.6%) and HDC Development (122.9%). The average debt ratio of companies listed on Kospi was 115%. Jungheung Group’s debt ratio stood at 105.1% at the end of 2020.
The manufacturer is the parent company of Herald Corp., publisher of the Korea Herald.
By Kim Da-sol ([email protected])