POSCO picked as preferred bidder for S Korea's Daewoo

SEOUL: South Korea's largest steelmaker POSCO on Friday moved closer to securing a controlling stake in trading and resources company Daewoo International in a deal reportedly worth about $3 billion.

POSCO, the world's fourth largest steelmaker, beat retail giant Lotte Group to become preferred bidder for the company, the Financial Services Commission said.

The deal would help it secure a steady supply of raw materials and assist in developing new revenue streams.

A successful sale of Daewoo International -- formerly the trading arm of the now-defunct Daewoo group -- would also boost government efforts to recoup funds spent during the 1997-1998 Asian financial crisis to bail out local companies.

POSCO was chosen "after reviewing its offer price, funding plans and business strategies", the financial regulatory body said in a statement without disclosing the offer price.

The steelmaker offered between $2.99 to 3 billion for a 68.1 per cent stake, Yonhap news agency reported.

Daewoo International has attracted interest from potential bidders due to its strength in exploration and development of natural gas and other resources.

Fitch Ratings said in a statement there was potential for synergies.

"For instance, POSCO's steel business can benefit Daewoo's trading of steel and steel raw materials operations, whereas Daewoo's strong sales network in emerging markets will support POSCO's steel exports."

Fitch said the resource development business was another platform for the two companies to work together.

It said the potential cost was not seen as a problem for POSCO which "still has the most conservative financial profile among the top global steel producers".

State-run Korea Asset Management Corp, which bailed out many local firms after the 1997-98 crisis, is the largest shareholder in Daewoo International with a 35.5 per cent holding.