CJ Group Offers $1.8B For Korea Express

With a $1.8 billion offer, CJ Group has outbid POSCO in the race for in South Korea’s top logistics company Korea Express, Reuters reported. CJ Group, a food-to-entertainment company, outbid POSCO by about 200 billion won. A deal for the company may come as soon as Tuesday, Reuters said.

(Reuters) – CJ Group offered about $1.8 billion for a controlling stake in South Korea’s top logistics company Korea Express Co Ltd , outbidding sole rival bidder POSCO by about 200 billion won, a source close to the matter said.

The source with direct knowledge of the deal said food-to-entertainment group CJ was likely to be picked as a preferred bidder and the decision could come as early as Tuesday.

POSCO, CJ and Korea Express declined to comment.

The final offer came in higher than the $1.4 billion range penciled in the preliminary round of the bidding for at least a 37.6 percent stake and sent shares of Korea Express and CJ Corp sharply lower.

Shares in Korea Express, whose businesses include parcel delivery, freight forwarding and shipping, tumbled 14.9 percent, while CJ Corp, the core unit of CJ Group, plunged 10 percent, its biggest daily loss in more than two years.

“Market participants were widely expecting POSCO to take over Korea Express and anticipating Korea Express would benefit more if POSCO bought it,” said Yoon Gwan-cheol, an analyst at Hanyang Securities.

“POSCO is a potential customer with heavy cargo demand, which could be quite profitable for Korea Express, and could also have raised the chances of Korea Express expanding overseas. Those expectations boosted Korea Express shares recently. Now they are plunging on disappointment.”

The surprise tie-up between Samsung SDS and POSCO announced last week raised the prospect of the alliance winning the auction, as it could allow Korea Express to add the country’s biggest business group to its core customer base.

CJ shares came under pressure on concerns that the 2 trillion won it is paying for a controlling stake values Korea Express at nearly double its current market price.

“CJ is paying too much…especially given that its synergy benefits are seen much smaller than what POSCO might have gained from the deal,” said Kim Tae-min, an analyst at Solomon Investment & Securities.

The deal received a new twist on Monday as the third bidder Lotte Group walked away at the last minute and CJ sought legal action against its former adviser Samsung Securities Co

after the brokerage firm’s affiliate tied up with rival bidder POSCO.

South Korea’s big business groups are investing heavily in logistics services, betting on robust growth in electronic commerce and growing foreign trade in the export-driven economy, Asia’s fourth largest.

POSCO bought Daewoo International , which ships steel products overseas, last year for $2.8 billion.

The Korea Express stake sale is part of the restructuring process at Asiana’s parent Kumho Asiana Group.

Kumho Asiana’s acquisition sprees, which included Korea Express and Daewoo Engineering & Construction , led to liquidity problems. It sold part of its Daewoo stake to a private equity fund led by Korea Development Bank late last year.

($1 = 1083.600 won)

(By Ju-min Park; Additional reporting by Miyoung Kim; Editing by Jonathan Hopfner)