POSCO has secured a â‚©1.24 trillion (US$1.08 billion) overseas investment by selling 38% stake in POSCO Engineering and Construction to Saudi Arabia's sovereign wealth fund.

POSCO added that it would also collaborate with Public Investment Fund (PIF) to establish a Saudi government-run construction firm. The joint venture will build major railroads, hotels and buildings ordered by Saudi Arabia. The company declined to comment on when the joint venture would be established.

The development comes amid the firm's struggles to shrug off recent controversies involving its executives allegedly creating slush funds and its clash with Daewoo International over the trading arm-owned gas field in Myanmar.

The Saudi state-backed investor initially offered the deal in August, as its country seeks to invest a record amount in public infrastructure projects, such as airports and roads, to stimulate the economy and cut energy dependency.

POSCO and PIF signed a memorandum of understanding backed by the South Korean government during President Park Geun-hye's visit to the Middle East in March.

Analysts had mixed views on the matter, with some saying it would help streamline the firm's affiliates while others voiced concerns over the construction unit's long-term finances.