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Doosan Infracore gains upper hand in case involving its Chinese unit

By Yonhap

Published : Jan. 14, 2021 - 15:55

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This photo taken on June 16, 2020, shows the logo of Doosan Group in front of the group's headquarters in Seoul. (Yonhap) This photo taken on June 16, 2020, shows the logo of Doosan Group in front of the group's headquarters in Seoul. (Yonhap)
Top construction equipment maker Doosan Infracore Co. on Thursday gained the upper hand in a lawsuit brought against it by investors in its Chinese unit Doosan Infracore China Co. (DICC) as the Supreme Court sent the case back to a lower court for retrial.

The highest court ordered the appeals court to reconsider its ruling favorable to the financial investors including Mirae Asset Private Equity, saying that Doosan Infracore's failure to share information about its Chinese unit did not get in the way of financial investors selling their 20 percent stake in DICC.

In 2011, Doosan Infracore invited financial investors of DICC to make inroads into the Chinese construction equipment market and repay its debts, promising to help them retrieve their investment by listing the shares of DICC on the Chinese market within three years.

In returning for their investment worth 380 billion won ($346 million), Doosan Infracore gave a 20 percent stake in DICC to financial investors, holding on to a 80 percent stake of its Chinese unit.

Doosan Infracore promised that it would sell its 80 percent stake in DICC to ensure the prices of financial investors' stake in the unlisted company would not fall if it failed to list DICC on China's stock market within three years.

But Doosan Infracore failed to list DICC on China's stock market during the cited period.

Financial investors urged Doosan Infracore to sell its stake as they wanted to sell their stake at a reasonable price to retrieve their investment.

In a bid to facilitate the stake sale, the investors called for a wider disclosure of DICC's internal information, but Doosan Infracore refused their calls, citing concerns over leaks of secret information.

Defying Doosan Infracore's claim, the investors launched the legal dispute in 2015, urging Doosan Infracore to buy back their 20 percent stake in DICC for 800 billion won.

In the previous two trials, the rulings were mixed. A local court found in favor of Doosan Infracore, while an appeals court upheld the investors' claim calling for the release of wider information on DICC.

With the order for retrial by the highest court, Doosan Infracore has no need to buy back the 20 percent stake in DICC from its financial investors including Mirae Asset Global Investments Co.

The buyback of the stake held by the financial investors was expected to cost about 800 billion won and put a burden on cash-squeezed Doosan Group's self-rescue plan.

In December, Doosan Heavy Industries & Construction Co. signed an initial deal with Hyundai Heavy Industries Holdings Co. to sell its stake in Doosan Infracore. (Yonhap)