론스타 펀드의 극동건설 인수 및 매각 사례

This case is prepared for the students who know at least intermediate level of accounting. Kukdong Engineering and Construction (henceforth Kukdong) had experienced financial difficulties in the period surrounding 1997 Asian financial crisis and went into receivership. As a result, Kukdong became to get managed by the court. Within couple of years, Kukdong’s financial status improved and the court decided to sell Kukdong to new owner. Lone-star fund, a U.S. based private equity fund, won the fierce competition with the purchase price of 170 billion Korean Won and became the new owner of Kukdong in 2003. After the acquisition of Kukdong, Lone-star started to extract cash from Kukdong right away. For example, Lone-star sold Kukdong’s headquarter building and other tangible assets. With the cash earned through the process, Kukdong paid dividends and repayed capital by the way of capital reductions to pay cashes to Lone-star. The total amount of dividends and capital reduction reaches to 222 billion Won. Finally, Lone-star sold the Kukdong to Woongjin Group in 2007 at the price of 660 billion Korean Won. In total, Lone-star earned astonishing 51 rate of return per year through the investment in Kukdong. Through this case, students can learn the way that a private equity fund makes investment and collects cash back from the investment. In addition, students can learn the difference between capital reduction and dividends, which is difficult concepts for the students to understand in class, and how to engage in corporate restructuring and workouts. Tax-related issues for the dividends are also introduced in the case. Finally, the case provides an opportunity to think about business ethics through studying circumstance and happenings around the time of the acquisition of Kukdong by Lone-star and its management style. The importance of corporate transparency is also introduced in the case.