Further Restructuring
South Korea's largest steelmaker POSCO said on June 16 that Chairman Kwon Oh-joon signed a deal with the gulf state’s Public Investment Fund (PIF) secretary-general Abdulrahman al Mofadhi, selling the 38 percent stake of POSCO Engineering and Construction (E&C) for 1.24 trillion won (US$1.12 billion).
The deal was known to be a move aimed at intensifying cooperation in infrastructure projects in the Middle East country, as well as accelerating the corporate restructuring.
The deal with Saudi Arabia’s sovereign wealth fund PIF includes a 26 percent stake owned by POSCO and a 12 percent share that POSCO E&C will get from issuing new shares.
POSCO will maintain its largest shareholder status in POSCO E&C with a 52.8 percent stake. The PIF will emerge as the second-largest shareholder of POSCO E&C with the deal.
Both will establish a joint venture to carry out a diversity of infrastructure projects, including the construction of railways, hotels, and buildings in Saudi Arabia.
The Saudi Arabian sovereign wealth fund initially offered the deal in August last year, as Saudi Arabia seeks to invest a record amount in constructing public infrastructures, such as airports and roads, to stimulate the nation’s economy and cut energy dependency. The deal was backed by the South Korean government during President Park Geun-hye’s visit to the Middle East in March.
The deal also comes as POSCO is pushing to expand cooperation with the Saudi sovereign wealth fund on various fronts. Daewoo International, the trade arm of POSCO, is now pushing to buy a 15 percent stake in a car company led by the Saudi fund for about 60 billion won (US$54 million). The move is part of Daewoo International's program to enter the car manufacturing business, ranging from design and parts supply to assembly. The deal is reportedly expected to be finalized in a few months.