Editor’s Note
This article discusses Hoban Construction’s potential acquisition of Doosan Machine Tool, highlighting the company’s aggressive M&A strategy and diversification efforts. The valuation and strategic implications are based on current market analysis and available reports.
Hoban Construction is making aggressive strides in the mergers and acquisitions (M&A) market. Following its acquisition of media outlets and Daehan Electric Wire, the nation’s second-largest wire manufacturer, this year, the company is now considering acquiring a metal processing machinery manufacturer with a valuation reaching up to 3 trillion won. This move demonstrates its push for business diversification, backed by substantial cash reserves.
According to the investment banking (IB) industry on the 28th, Hoban Construction is being mentioned as a potential buyer for Doosan Machine Tool, which has been put up for sale in the M&A market. Doosan Machine Tool is a company that manufactures machine tools for processing metal materials. It was established in 2016 when MBK Partners acquired the machine tool business division of Doosan Infracore.
Previously, MBK Partners recently put up 100% of Doosan Machine Tool’s shares for sale through a special purpose vehicle (SPC), DMT Holdings. The transaction price is mentioned to be between 2.7 trillion and 3 trillion won. Besides Hoban Construction, SeAh SangYeoK and DTR Automotive are known to be conducting individual negotiations.
Hoban Construction’s interest in acquiring Doosan Machine Tool stems from its high growth potential. As automation and precision rapidly emerge as core corporate competitive strengths, demand for the latest machine tools is expected to continue. Notably, Doosan Machine Tool is evaluated as a company specialized in CNC (Computerized Numerical Control), a high-value-added product. CNC machines are being introduced on a large scale in the automotive, aerospace, and energy sectors, which are promoting the Fourth Industrial Revolution.
Market prospects are also bright. According to market research firm Fortune Business Insights, the global machine tool market size is projected to grow from $112.78 billion in 2019 at an annual rate of 4.5%, reaching $151 billion by 2027.
Recovering performance is another factor attracting interest. Doosan Machine Tool recorded sales of 1.2211 trillion won and operating profit of 102.2 billion won last year. It is rapidly approaching its peak performance in 2018 (1.778 trillion won). Although it suffered a downturn due to performance declines in the Chinese market caused by the US-China trade dispute in 2018, sales and operating profit surged in the third quarter of last year. This year, it is known that overall performance is reaching record highs as order volumes increase in key markets like China, Europe, and the US.
Hoban Construction is actively pursuing M&A in non-construction sectors. This is interpreted as being significantly influenced by the high uncertainty in the construction business climate. The public land development business, which was the foundation of Hoban Construction’s growth, is gradually shrinking in volume, and the urban redevelopment market faces tough bidding conditions due to competition with large construction companies. There is a need for a new breakthrough to secure stable revenue sources in the long term.
The M&A fields under consideration are also diversifying. While previously focused on the leisure sector, the company is now expanding its business portfolio centered on companies with high potential, like Doosan Machine Tool. A prime example is Daehan Electric Wire. Hoban Construction, spearheaded by Hoban Industry, acquired a 40% stake in Daehan Electric Wire for 217.8 billion won last May. Hoban Industry is a comprehensive construction company 100% owned (including treasury shares) by Kim Min-seong, a managing director and the second son of Chairman Kim Sang-yeol, along with Hoban Construction and Hoban Property.
By acquiring management control of Daehan Electric Wire, the nation’s second-largest wire manufacturer, Hoban Construction can now pursue expansion into Daehan’s core areas such as submarine cables, renewable energy, and power, as well as overseas business ventures. Submarine cable technology, in particular, is highly evaluated for its potential, with domestic competitor LS Cable & System, Japan’s KCS, and China’s SBSS being notable players.
Entry into the media business is also active. Last May, it successively acquired the internet economic media ‘EBN’ and the IT-focused daily newspaper ‘Electronics Times’. Industry insiders predict that Hoban Construction will acquire three more cable pay-TV channels in the future. Furthermore, Hoban Construction is the third-largest shareholder of Seoul Newspaper, holding a 19.4% stake. Recently, it has actively pursued acquisition by proposing to purchase all shares (28.63%) held by the Seoul Newspaper Employee Stock Ownership Association.
The company has also made a full-scale entry into the jewelry market. On the 27th, it announced the jewelry brand ‘CHÉRET’ through Samsung Geum Trading. CHÉRET is the first jewelry brand launched after Hoban Property acquired Samsung Geum Trading, a gold distribution specialist, last year. The plan is to grow it into a global brand, starting with its first collection. Hoban Property is led by Vice President Kim Yoon-hye, the eldest daughter of Chairman Kim.
The industry views that Hoban Construction will continue its business territory expansion with massive firepower. According to the Financial Supervisory Service’s electronic disclosure system, Hoban Construction held cash and cash equivalents amounting to 1.7407 trillion won on a consolidated basis last year. Its debt ratio is at a favorable level of 53.0%.
