POSCO Steps Up Resources Exploration

Steel giant takes over Daewoo International to intensify resources exploration, and construction overseas

POSCO signed a share sale and purchase agreement with KAMCO, the head of Daewoo International Joint Sales Council, on Aug. 30 at the COEX InterContinental Hotel in the presence of Chairman Chung Joon-yang and KAMCO CEO Lee Cheol-hui
POSCO, which was selected as a preferred bidder this past May 14, by entering this main agreement acquires approximately 68% of Daewoo International shares totaling 68,681,566 shares.
The final undertaking cost is 3372.4 billion won, 87.8 billion won (2.5%) less than the original offer. POSCO plans on paying for this cost within its cash assets without any external loans. Share transfer and remaining payments will be completed by the end of September.
Chairman Chung at the signing ceremony said, “I am positive that Daewoo International and POSCO can create synergy, and Daewoo International’s overseas resource development abilities will play a great role in expanding our business.” He also added, “I will not hold back on providing support so that Daewoo International can do even better than now.”
Alongside Daewoo International, POSCO will strengthen competitiveness in its main business, steel, while also increasing synergy for growth together with its family companies. POSCO plans to foster Daewoo International as a global network company centering on trading, resource development, and new business sectors to reach 2 trillion won in annual sales by 2018, with a global network of over 100 overseas subsidiaries.
In addition, utilizing the already accumulated network, plans to establish a global sales channel in undeveloped markets such as the Middle East and Africa, to proactively resolve POSCO’s overseas sales supply issue. Also, based on overseas resource development know-how accumulated from Australia’s Narrabri bituminous coal mine and Ambatobi nickel mine in Madagascar, the company will support securing raw materials for POSCO, and actively secure rare metals such as magnesium, lithium, titanium, and zirconium, so that POSCO can grow into a comprehensive global materials provider.
Aside from this, overseas energy exploration projects such as the gas development in Myanmar and Peru and petroleum development in Vietnam will be actively expanded so that related affiliates including POSCO E&C and POSCO Power create synergy together in overseas businesses, and also explore various new businesses such as overseas new city development or marine structural businesses. POSCO will maximize the value of Daewoo International and speed up the PMI process so that the company can merge with POSCO’s corporate culture.
POSCO assigned Chairman Dong-hee Lee the leader of PMI process this past June-
In the meantime, POSCO is operating various financial support programs for small and mid-sized enterprises to provide practical assistance to partner companies. POSCO newly established an intermediates settlement scheme for equipment purchase, reduced the credit sales period for purchasing cards, and will carry out early payment of Chuseok funds to resolve financial difficulties of SMEs.
POSCO started operating the intermediates settlement scheme this month. This adds an additional middle payment to the existing process where POSCO only paid SMEs the down payment and remaining payment upon delivery of goods.
The amount of intermediate payment is 30% of the contract amount and will be eligible for contracts with a value exceeding 100 million KRW and the contracted delivery period of more than 180 days, and is paid out upon the provider’s request at the time exceeding half of the payment period. The company hopes that this funding will assist SMEs providing equipment to POSCO prepare manufacturing and operational funds.
Based on last year, purchase contracts that meet these requirements totaled 747 billion won. Once the scheme is applied, SMEs can receive 220 billion won in advance.
POSCO plans on applying the benefits of this scheme to not only to primary SME partners, but also 2~4th party partner companies.
For sales statements dated since September 10th, POSCO will reduce the credit sales period for purchasing card from 60 to 40 days. A purchasing card is an electronic card issued by a company’s main transactional bank, allowing the company to pay out for goods delivery with this card rather than a promissory note, and the provider receives these funds from the bank. The provider can either receive the payment in full on the payment deadline, or receive discounted funds prior to the final date of payment. nw

POSCO Chairman Chung Joon-yang, 2nd R, holds the agreement to purchase a 68 percent stake in Daewoo International by POSCO with Chairman Lee Cheol-hui of KAMCO at Coex in Seoul Aug. 30.