The mega-merger of South Korea's Hyundai Heavy Industries (HHI) and DSME has been confirmed after Samsung Heavy Industries decided against taking part.
State-run Korea Development Bank (KDB) said a formal deal will be signed in early March following a conditional agreement in January.
KDB has a 55.7% holding in DSME and the transaction will be worth KRW 2 trillion ($1.78bn).
The Yonhap news agency said KDB will hand over its stock to HHI and buy KRW 1.5 trillion worth of HHI shares to be issued later.
It will also consider KRW 1 trillion of new lending to DSME.
The report said HHI will be split into two companies, with one to remain listed, but no further details were available.
HHI parent Hyundai Heavy Industries Holdings will have 26% of the new yard giant, with KDB on 18%.
Dominating the market
The mega-merger comes two years after KDB bailed out DSME, which had run into financial difficulty.
The South Korean giants are already dominant in the big tanker market with DSME sporting the world's largest VLCC orderbook, ahead of HHI, according to Clarksons.
DSME also leads the world in the construction of LNG carriers, with Hyundai Heavy having the third largest orderbook in the sector and Samsung Heavy Industries sandwiched in the middle. The same trio lead the construction of large container vessels.
Major DSME clients include the BW Group, MSC and John Angelicoussis, while HHI has substantial orders in the book from Zodiac Maritime, Kyklades Maritime and Polaris.
In April last year, the Korean ministry of oceans and fisheries said it would seek a new owner for DSME in the mid to long term.
The ministry said the sale would be carried out after "considering market conditions and its business normalisation efforts".
Speculation then arose that the big three — HHI, DSME and Samsung Heavy Industries — could be cut to two through some form of combination.
A previous $5bn deal to sell the yard to Korea's Hanwha group collapsed in January 2009, after the buyer was unable to raise the money in the financial crisis.
