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DSME PRIVATISATION - HYUNDAI SET TO TAKE MAJORITY STAKE

Thursday, January 31, 2019 

Following reports that Hyundai Heavy Industries (HHI) wished to buy a majority stake in rival yard Daewoo Shipbuilding & Marine Engineering (DSME), the state-run Korea Development Bank (KDB) has said that it has agreed a memorandum of understanding in which it will sell its 55.7% stake in DSME to HHI.

This would extend Korea's dominance in shipbuilding, with the industry dominated by a combined HHI and DSME, currently the nation's No1 and No2 shipbuilders, and Samsung Heavy Industries.

If the deal, estimated at over 2 trillion won (US$1.79 billion), goes ahead, it would be the shipbuilding industry's largest-ever acquisition.

The South Korean shipbuilding industry has been suffering financial losses over the past few years caused by over-capacity in shipping  and mounting competition from China, but new orders have recently started to recover, led by increasing demand for vessels such as LNG carriers.

The Korean government is said to be in favour of an overhaul of its shipbuilders, hoping that two major players could dominate the sector to better compete against China and weather fluctuations in demand.

Last year, HHI had an order backlog totalling 11.14 million gt, the largest in the sector, while the figure for DSME was 5.84 million gt, which together represent 21% of the global orderbook.

Meanwhile KDB said that the deal includes liquidity support for DSME worth 2.5 trillion won (US$2.25 billion), and it was approaching Samsung Heavy to explore possible interest in becoming involved in the takeover.

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