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Prospects are Bright for Builder’s Paid-in Capital Increase
M&A of Ssangyong E&C
Prospects are Bright for Builder’s Paid-in Capital Increase
  • By matthew
  • August 30, 2013, 03:14
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The M+W Group is expected to become the preferred negotiator for the capital increase negotiations of Ssangyong Engineering & Construction. Priority rights are likely to be given to the German engineering company, even if the investors propose their prices through due diligence. Market insiders are predicting that the capital increase will be made before the end of this year, as the granting of the preferred negotiation rights signifies the M+W Group’s positive stance. 

At present, the creditors and the construction firm are in negotiations with M+W, which is trying for the fourth time to acquire the company. During the first and second bids last year, its competitors withdrew from the tender midway and M+W became the sole bidder, so that the entire process was aborted in accordance with the State Contract Act. It did not participate in the third tender of May last year.

M+W is taking great caution under the circumstances. It is planning to maximize its shares in Ssangyong E&C by means of a paid-in capital increase, because an open sale will lead to an increase in the price. In this way, the company does not have to acquire old shares and still can secure management rights, while supporting new investment through the issuing of new shares. 

M+W has asked for preferred negotiation rights before the start of the talks. The creditors are positive about the granting of the rights. The specific size of the paid-in capital increase and the acquisition costs are expected to be fixed through the negotiations and due diligence procedure. M+W is planning to increase its market share in Asia by using Ssangyong E&C as leverage. It is a high-tech engineering company located in Germany with an annual sales amount of approximately 3 trillion won (US$2.697 billion). It has needed a construction firm having a lot of experience in global markets for its portfolio adjustment and business expansion in Asia. 

If the negotiations go well this time, the creditors do not have to do a debt-equity swap this year. They have made it clear that they would convert debt into equity if they fail to attract new investment funds by this year’s end.