[Courtesy of Hyundai Heavy Industries]
HHI signed a conditional memorandum of understanding (MOU) with Korea Development Bank, a state policy lender which has a 55.7 percent stake in DSME, the country's second-largest shipyard. HHI will be split into two to create an integrated corporation that oversees affiliated shipyards.
KDB will facilitate the deal with 1.5 trillion won ($1.34 billion) in paid-in capital for third-party allocation of DSME and another one trillion won if needed, while HHI will issue new convertible preferred shares and common shares.
"We reached a consensus with Hyundai Heavy Industries, which focuses shipbuilding, on the necessity of industrial restructuring and went ahead with M&A," KDB Chairman Lee Dong-gull told reporters.
The deal with HHI was temporary, Lee said, adding that KDB would soon contact Samsung Heavy Industries, another potential buyer, to see if it intends to acquire DSME.
South Korea's shipbuilding industry has been restructured, but workers at top three shipyards have opposed consolidation, fearing layoffs. DSME's labor union warned of strong action to derail HHI's acquisition, saying it could lead to massive restructuring. HHI's union also opposed the deal.
With a massive injection of state money estimated at 10 trillion won, Daewoo Shipbuilding has been kept afloat in return for a sweeping rehabilitation program to ease its liquidity crisis caused by dwindling orders and a prolonged business slump. The shipbuilder turned a profit in 2017 after six years of loss. It is forecast to log an operating profit of 800 billion won on sales of 8.9 trillion won in 2018.
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