The state-backed Korea Development Bank (KDB) has agreed to sell a major shareholding in Daewoo Shipbuilding & Marine Engineering (DSME) to the South Korean Hanwha Group.
The KDB has been in control of DSME for over two decades through its 55.7% shareholding in the shipbuilder.
It appears the South Korean government has wasted no time in finding a buyer of financially stricken shipyard after a high-profile, 51-day-long industrial action earlier this year.
News agency Reuters said under a tentative agreement announced by DSME, the Hanwha Group will invest KRW 2trn ($1.4 billion) in return for a 49.3% stake and management rights in the shipbuilder.
Under the deal KDB will see its shareholding reduced to 28.2%.
It is understood the deal will involve control of both military and commercial shipbuilding although this could not be confirmed.
The price may have been influenced by DSME’s high debt levels. The shipbuilder is reported to have a debt ratio of 547% as of the end of 31 March.
KDB’s new chairman Kang Seog-hoon is expected to hold a news conference explaining the deal later today.
DSME’s shares were reported to have jumped nearly 9% today, while Hanwha’s related shares dropped by around 4% after news of the sale of the shipyard broke.
Should Hanwha complete the deal then KDB will continue its exit from owning shares in South Korean shipbuilding.
It recently sold its stake in Daehan Shipbuilding to KH Investment for around $200m.
Last year it sold its 95% stake in STX Offshore& Shipbuilding to KH Investment and debt clearing house United Asset Management Co for KRW 250bn.
The move is not Hanwha’s first attempt to buy DSME having made a KRW 6.3trn bid in 2008.
Most recently an attempt to merge DSME with compatriot shipbuilder Hyundai Heavy Industries was blocked by the European Union competition authorities.
The recent labour strike at DSME’s main Okpo shipyard was said to have hastened KDB’s decision to sell the loss-making shipbuilder.
The 51-day industrial action over wages resulted in DSME suffering losses amounting to KRW 800bn ($611m). Some 120 workers had demanded a 30% wage increase and improved employment conditions.
DSME reported a reduced net loss of KRW 668bn ($509m) for the first half of this year amid a rise in newbuilding contracts. It was half the KRW 1.24trn loss that it logged for the same period in 2021.
The shipyard registered a net loss of KRW 470bn in the first three months of 2022, which was attributed to increasing prices for steel plate and other shipbuilding materials.
For the second quarter of 2022, DSME reported an operating loss of KRW 99.5bn and a net loss of KRW 176bn — down 78% and 64% respectively from the previous quarter.
