Despite a sliding stock market, bidders for 's Daewoo Shipbuilding may have to pay a hefty premium and large fees to snap up the coveted $4 billion asset amid upbeat prospects for the sector.
Slow progress in the bidding process due to union protests and delays in selecting a lead manager, which coincided with a retreat in global stocks and a decision to exclude foreign bidders, has benefited potential buyers by reducing competition and the value of the deal by $2 billion from a year ago.
But a global credit squeeze and recent warnings from Korean regulators against debt-financed buyouts mean a successful buyer will have to give up some of their assets or pay hefty fees to win the world's third-largest shipbuilder.
's finance minister said on Tuesday that the government, which holds 50.4 percent of Daewoo, will seek immediate privatization of the group, clearing concerns over further delays and pushing up its share price nearly 5 percent.
Despite toughening financial market conditions, at least five groups have expressed interest in Daewoo, attracted by its strong cash flow, order books and bright earnings prospects.
That means bidders will be tempted to raise their offers and pay high borrowing costs to secure the asset, with little financial help from foreign buyout funds, as buyers will be dissuaded from including overseas funds due to Daewoo's assets in sensitive defense technology.
Daiwa Institute expects the Daewoo deal could fetch a management premium of as much as 30 percent, which will boost the value of the stake up for sale by its top shareholders to $5 billion, based on the current share price of 39,800 won.