POSCO's takeover of Daewoo International to create synergy: analyst

By Kim Young-gyo
HONG KONG, May 14 (Yonahp) -- South Korean steelmaker POSCO's possible
acquisition of Daewoo International Co. will likely create synergy between the
two companies, an analyst said Friday.
POSCO, the country's No. 1 steel producer, was named as the preferred bidder for
a controlling stake in Daewoo International Co. earlier in the day.
"We believe POSCO was selected as the preferred bidder because of its higher
bidding price, ability to finance the deal without leverage and strong business
synergy with Daewoo International," said Shin Seung at the Swiss-based financial
firm UBS AG.
The UBS analyst expected that Daewoo International can increase its revenue by
about 40 percent if it becomes the sole vendor for POSCO's steel exports, while
POSCO can benefit from access to Daewoo International's global sales network and
new exposure to overseas resources such as natural gas, coal, nickel and coal.
Shin also said Daewoo International will be able to get cheaper financing after
it is acquired by POSCO.
"As Daewoo International becomes a consolidated company under POSCO, we believe
it could have a positive influence on Daewoo International's credit rating.
Subsequently, funding costs for new projects will become cheaper and easier. As
Daewoo International is likely to engage in further projects that require large
funding, we believe cheaper financing will be one of the key benefits to Daewoo
International from this M&A," he said.
Meanwhile, Moody's Investors Service said Tuesday it has placed POSCO's A1
foreign currency bond rating on review for a possible downgrade, citing "the
company's ambitious capacity expansion plans and appetite for acquisitions."
ygkim@yna.co.kr
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