Construction joint venture to be established
- Saudi Arabias Public Investment Fund has signed a deal to buy a $1.1bn stake in South Korean Posco Engineering and Construction
- It will acquire a 38 per cent stake from parent Posco, which remains the majority shareholder
Saudi Arabias Public Investment Fund (PIF) has signed a $1.1bn deal to acquire a 38 per cent stake in South Koreas Posco Engineering & Construction (E&C), according to local news agency Yonhap News.
Parent company Posco will sell a 26 per cent stake. Posco E&C will issue new shares to sell a 12 per cent holding to PIF.
Posco will remain the majority shareholder with a 52.8 per cent stake.
Posco E&C had net assets of KRW2,972bn ($2.7bn) at the end of 2014, but a high debt burden.
MEED reported in February that Posco had signed a preliminary deal with PIF to sell part of the company.
Posco is unloading assets to focus on its core business and cope with the steel market downturn.
The sovereign wealth fund and Posco plan to establish a joint venture to carry out infrastructure projects in Saudi Arabia, says Yonhap. They will focus on rail and hotel projects.
The deal has been delayed by corruption allegations at Posco E&C. Prosecutors investigated Posco and several subsidiaries including Posco E&C over alleged $9bn slush funds and political corruption earlier in 2015, according to local press.
Another South Korean subsidiary of Posco, Daewoo International, is in talks with the Saudi National Automobiles Manufacturing (SNAM) to establish a $1bn car manufacturing plant, with investment from PIF, according to press reports.
SNAM will hold a 50 per cent stake, PIF, 35 per cent, and Daewoo a 15 per cent stake in the project.
The plant will have the capacity to produce 115,000 cars a year.