Wednesday, June 28, 2006

Grown businessmen once again giddy as schoolgirls

I have always loved these kind of stories. Every time some major global consolidation takes place, the Korean press buzzes with news on how a Korean company could be next. Today in the wake of the Mittal-Acelor merger comes talk about POSCO may be taken over by somebody.

Reading this perfectly timed headline made a stream of coffee come out my nose. POSCO is a flagship of Korean industry, particularly domestic industry despite its international fame and volume produced. Come on guys, you expect ANY foreign company to get after POSCO after other foreigners got bushwacked in attempts at taking KT&G and SK Corp? Not only that all the investigations against the banking sales recently? Lets face it, Korea at the moment has a blinking neon STAY AWAY sign to capital wanting to get pieces of high profile Korean companies.

The talk though does beg the question, "Could POSCO take over anybody?" A quick scan of their balance sheet indicates a good debt to equity ratio, indicating they may have ammo to tap at banks if they want. Also they do need more capacity to meet Chinese demand. However decent Chinese-centric targets are limited. However just to give an idea of the reach POSCO could have, let say the company borrows to make their debt equity ratio 1:1. This equals about US$19 billion. The once mighty US Steel currently has a market capitalization of US$7 billion. POSCO could be a buyer not a seller.


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