Report: Doosan exploring sale of construction equipment business, but wants to keep Bobcat

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Updated Jun 22, 2020

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Doosan Group’s apparent plans to retain Doosan Bobcat while selling Doosan Infracore—the Doosan subsidiary and parent company of the Bobcat and Doosan equipment brands—have met resistance from creditors, according to a report from the Korea Times.

Doosan Infracore was formed in 2005 when Doosan Group acquired Daewoo Heavy Industries & Machinery. When Doosan purchased Bobcat in 2007, it was slotted under the Infracore division.

The anticipated sale of Doosan Infracore is an effort by the parent Doosan Group to salvage another subsidiary, the debt-ridden Doosan Heavy Industries & Construction. Acquired by Doosan Group in 2001, the division provides power generation and includes engineering and construction services in Doosan’s home country of South Korea.

However, the paper reports that Doosan Group effectively only wants to sell off the Doosan-branded machines. While the company would sell off the Doosan Infracore business and the Doosan-branded excavators, wheel loaders, articulated dump trucks and attachments contained within, it wants to retain the 51 percent stake that the division currently has in Bobcat.

Doosan Group’s potential retention of Bobcat in the sale would have meant that the U.S. subsidiaries of Doosan Infracore—Doosan Infracore North America and Bobcat—would be owned by two separate companies in the future.

“The suspected move is interpreted as the group’s strong intention to keep cash-cow Doosan Bobcat under its control, and use the construction equipment firm to help Doosan Heavy normalize its financial status,” says the Korea Times in the earlier report.

The paper further reported that “on deciding which subsidiaries to sell off, the creditors and Doosan Group have been locking horns over selling the group’s Bobcat stake, as creditors are pressuring the group to unload the profitable unit while Doosan [Group] wants to retain it given its growth potential.”

The sale is one way Doosan Group could deal with subsidiary Doosan Heavy Industries & Construction’s $3.48 billion debt, which is due to be repaid by the end of the year, says the paper.

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“Bobcat’s contribution into Infracore’s consolidated operating profit in construction equipment last year accounted for 62.9 percent, meaning a spinoff will lower the attractiveness of Infracore,” KB Securities analyst Chung Dong-ik was quoted by the paper as saying.

The two U.S. entities of Doosan Infracore separated their businesses on Jan. 1, 2018, after operating together for seven years. Doosan Infracore purchased Bobcat in 2007.

In response to these reports, Doosan Infracore North America issued the following statement to Equipment World: “We are aware that Doosan Group continues to explore multiple options for restructuring assets to help stabilize Doosan Heavy Industries & Construction. Doosan Infracore, a wholly separate business unit from Doosan Heavy Industries & Construction, is on strong financial footing and has a positive growth outlook. Doosan Infracore remains focused on continuing to build on its success and reputation as a leading global equipment company.”