S.Korea Dongkuk drops builder buyout deal- paper

SEOUL, Dec 2 (Reuters) - South Korea's third-largest steel maker Dongkuk Steel Mill (001230.KS) has pulled out of a $321 million offer to buy control of a small domestic builder due to price differences, the Maeil Business Newspaper said on Tuesday.

A consortium led by Dongkuk was picked as a preferred buyer of a 50.1 percent stake in Ssangyong Engineering & Construction (012650.KQ) in July.

State debt clearer Korea Asset Management Corp (KAMCO), which is managing the deal, and other creditors had put the stake up for sale.

"We have decided to give up buying Ssangyong Engineering," the daily quoted an unnamed Dongkuk official as saying. "We will notify KAMCO of the decision on December 2."

A Dongkuk Steel spokesman said its board would make a decision on Tuesday on how to proceed with its acquisition offer, and KAMCO said it was waiting for Dongkuk's notice.

Shares of Ssangyong plunged a daily limit of 15 percent briefly after trade began, before trimming losses to 13 percent at 5,790 won by 0118 GMT, while Dungkuk Steel was down 3 percent.

The Dongkuk-led group had offered 31,000 won per share of the builder for a total of 462 billion won ($321 million), or more than 50 percent higher than Ssangyong's market price at the time.

Ssangyong's share price had tumbled more than 60 percent to 6,650 won since then to Monday's close. The reported collapse of the acquisition comes after global acquisition markets have been hammered by tight funding markets and recession in major economies, while debt-laden conglomerates are seeking to sell assets for cash.

The construction sector also has been strained by high raw material prices and a housing market slump, as well as reduced credit lines from banks.

($1=1439.4 Won)

(Reporting by Kim Yeon-hee; Editing by Keiron Henderson)