Doosan Heavy buys Skoda Power

Korean heavy industries company Doosan Heavy Industries & Construction will buy Czech power plant equipment maker Skoda Power for €450 million ($657 million).

Gyeongnam-based Doosan Heavy is buying 100% of Skoda Power from Skoda Holdings. The acquisition will give the Korean company access to the proprietary Skoda turbine technologies used in power plants, adding capabilities in the core technologies for boilers, turbines, and generators, which are the three key components of power plants. Following this deal, the Doosan group will be a complete plant supplier with the capability to provide engineering, procurement and construction (EPC) solutions.

Doosan Heavy has so far built over 300 nuclear, thermal and hydro power plants. It has another 60 under construction in Korea, the US, India, China and elsewhere.

The Skoda Power acquisition will be completed by the fourth quarter of 2009.

The acquisition enables Skoda Power to expand its product range and enter new markets, as well as strengthen its presence in the Czech Republic and Slovakia. Doosan is already present in some European markets, including the UK, Germany and Poland, through its UK-based subsidiary Doosan Babcock Energy. The Doosan group also has a presence in the Czech Republic through its North American subsidiary Doosan Infracore, which operates a manufacturing plant for bobcat construction and utility equipment

Doosan Infracore acquired the bobcat, utility equipment and attachments business units of Ingersoll Rand for $4.9 billion. The deal, which was announced in July 2007, is the largest outbound acquisition by a South Korean firm to date.

"We expect the synergies of the Skoda Power acquisition to generate an additional $4.26 billion in annual revenue in 2020," Doosan Heavy Industries & Construction president and chief executive officer, Geewon Park, said about the deal in a written statement. "In the coming years, Skoda Power and Doosan Babcock will spearhead our progressive expansion in Europe, the US, and other developed markets."

Doosan Heavy is being advised by Morgan Stanley. The Korea-listed firm said in a stock exchange filing that Export-Import Bank of Korea (Kexim), BNP Paribas, Citi and Standard Chartered Bank will provide debt financing for the deal. Kexim has a stated mandate to support the ambitions of Korean companies seeking to globalise and has been approaching markets every time there is a window of opportunity to raise funds. Most recently Kexim raised $1.5 billion through the sale of dollar-denominated bonds in early July.

Doosan Heavy's share price lost 2.4% on the Korea Stock Exchange yesterday to close at W68,100 ($56).