A Doosan ICE forklift.

Doosan Group will invest about USD50 million to establish a new company that will own and control the intellectual property rights of Bobcat.

Doosan-owned construction equipment and forklift manufacturer, Doosan Infracore, signed an agreement to buy Bobcat for USD4.9 billion, making the deal possibly South Korea's largest overseas acquisition (Forkliftaction.com News #321). Doosan expects to complete payment this month, a company spokeswoman tells Forkliftaction.com News.

The new company, Doosan Techno Holding Company, is planned to open on 15 November but details of the structure are currently confidential, the spokeswoman says.

The establishment of Doosan Techno is in line with Doosan's plans to transform itself into a holding company by early 2009. Doosan says in a statement the acquisition of Bobcat and the establishment of the new company are part of its plans to "make overseas investments to secure stable revenue sources". Forkliftaction.com News reported last year that Doosan, the largest shareholder of forklift manufacturer Doosan Infracore, wants to convert into a holding company to improve its transparency
(Forkliftaction.com News #250).

On 28 October, Doosan Group announced it was transferring its magazine business to its subsidiary Oricom Co Ltd and spinning off the Tower business unit and Bio Resources business unit.

Doosan's business activities are diverse, ranging from power plant construction and water desalination to publishing and shopping malls. Tower specialisies in building leases and is being spun off into Doosan Tower Co Ltd. The Bio Resources business, specialising in fodder, is spinning off into Doosan Fodder Co Ltd.

The spin-off and transfer of the three business units will reduce Doosan's debts by KRW380 billion (USD416 million) and its assets by KRW420 billion (USD456 million) and will "strengthen the companies' businesses and enhance their managerial efficiency while maximising business and shareholder value", Doosan's spokeswoman says.

"To convert into a holding company, the debt ratio must be under 200%. Through Doosan's corporate division project, Doosan corporate debt ratio will decrease rapidly."

Doosan says it is also eliminating its "circular equity investment structure" as part of its efforts to convert into a holding company.

The spokeswoman says circular equity investment structures are common in Korean companies.

Under these arrangements, the biggest company in the group invests in another subsidiary and then this subsidiary invests in another subsidiary and finally a subsidiary invests in the biggest company, she explains, saying the new structure will obviate this practice.