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POSCO, KDB moving to take over Dongbu Steel's Incheon operation: sources

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(GlobalPost/GlobalPost)

SEOUL, March 27 (Yonhap) -- POSCO, South Korea's largest steel producer, and Korea Development Bank (KDB) are moving to take over Dongbu Steel's operations in Incheon, west of Seoul, industry sources said Thursday.

According to financial insiders and industry observers, the two partners will sign a memorandum of understanding and confidential agreement (CA) with the steel mill and start necessary proceedings for the eventual purchase.

"Once the CA is signed, Dongbu will provide all necessary data needed to start due diligence on the mill," said a source, who declined to be identified.

He added that POSCO will also be given priority negotiating partner status in the takeover of stakes that Dongbu Group has in a proposed power plant in Dangjin, 123 kilometers south of Seoul.

The sale of stakes in the power plant and the steel mill is part of a broader restructuring effort being undertaken by the conglomerate that needs to generate cash to deal with its debt.

The family-run conglomerate announced a 3 trillion won (US$2.8 billion) self-help plan in mid November. KDB, meanwhile, plans to take part as a financial investor.

Observers said the Incheon mill may be worth 500 billion won, while stakes in the Dangjin plant may be worth 200-300 billion won.

If the partners take over the steel operations, POSCO will be in charge of running the mill, with the bank dispatching a chief financial officer to oversee its investments.

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