Daewoo Shipbuilding & Marine Engineering (DSME) said in a regulatory filing on September 26 that it signed a conditional investment agreement with Hanwha Aerospace and other Hanwha Group subsidiaries, including a two trillion won ($1.4 billion) paid-in capital increase.
Competitive bidding will be conducted through a "stalking-horse" method to provide an opportunity for the participation of other investors who offer better terms. Stalking horse is an initial bid on the assets of a bankrupt company, which will choose an entity from a pool of bidders. It sets the low-end bidding bar so that other bidders can not underbid the purchase price.
"As a result of discussions with Hanwha Group, DSME signed a conditional investment contract with Hanwha Group and decided on a stalking horse method that determines the final investor through competitive bidding," Korea Development Bank (KDB) chairman Kang Seok-hoon told reporters. KDB controls a 55.7 percent stake in the Daewoo shipyard.
In a deal aimed at creating a mega domestic shipbuilder, South Korea's Hyundai shipbuilding group signed a contract with KDB in March 2019 to put DSME under its wing. At the time, policymakers thought that the two shipbuilders could acquire the world's best technology and know-how, achieve economies of scale, and increase productivity by sharing technology, design, parts and services.
The merger followed years of painful restructuring in South Korea's embattled shipbuilding industry, which had suffered from dwindling orders, a prolonged business slump and a strong challenge from Chinese shipyards. With a massive injection of state money, DSME was kept afloat in return for a sweeping rehabilitation program.
However, KDB has tried to find a new owner since the European Union refused to endorse the merger between the two shipbuilders in January 2022, citing a possible monopoly in the liquefied natural gas (LNG) carrier market. South Korean shipbuilders have dominated the construction of LNG carriers.
DSME will be able to respond to a shortage of funds and secure capital for investment in future growth engines, Kang said, casting doubt on DSME's independent normalization. "I thought the fundamental solution was to find a competent private owner to improve DSME's (financial) structure and strengthen its mid-to-long-term competitiveness."
Thanks to a recovery in the global shipbuilding industry, DSME has garnered brisk orders for years, but the shipbuilder swung to a net loss of 1.69 trillion won on sales of 4.48 trillion won in 2021 following a net profit of 86.6 billion won a year ago.
Hanwha's fresh bid came after Hanwha Aerospace, an aircraft parts maker involved in the production of homemade space rocket engines, has vowed to become a global defense solution company like Lockheed Martin, a U.S. aerospace, arms, defense, information security, and technology corporation.
At a board meeting in July 2022, Hanwha Aerospace was allowed to absorb the defense business of Hanwha Corporation, a manufacturing and trading company that produces munitions, navigational systems for guided weapons, and lasers. Hanwha Defense, a defense contractor known for K9 self-propelled howitzers and infantry fighting vehicles, will be completely merged into Hanwha Aerospace.
Hanwha Aerospace is a key member of Space Hub, a group-wide team led by Kim Dong-kwan, the eldest son of group chairman Kim Seung-yeon, that combines different products or services such as satellite components.
© Aju Business Daily & www.ajunews.com Copyright: All materials on this site may not be reproduced, distributed, transmitted, displayed, published or broadcast without the authorization from the Aju News Corporation.