Samsung Heavy Industries Co., a major South Korean shipyard, is unlikely to join the race to take over Daewoo Shipbuilding & Marine Engineering Co., as its parent Samsung Group is not interested in further expanding its shipbuilding business, industry sources said Friday.
Last month, the state-run Korea Development Bank (KDB) signed a temporary memorandum of understanding (MOU) with Hyundai Heavy Industries Co., the world’s largest shipbuilder by sales, to sell its controlling stake in rival Daewoo Shipbuilding.
KDB is Daewoo Shipbuilding’s main creditor, with a 55.7 percent stake in the company.
KDB said earlier it would contact Samsung Heavy, to see if it is interested in the Daewoo Shipbuilding takeover.
“As far as I know, the management is reviewing the proposal (from KDB),” a Samsung Heavy official said. “But it is too early to say (whether to bid or not).”
Samsung Heavy is requested to make its own takeover proposal by no later than the end of the month. KDB plans to finalize a deal in early March after reviewing Samsung Heavy’s proposal.
Industry sources said in the past, Samsung has repeatedly denied its intentions to take over Daewoo Shipbuilding and this time it would not be much different as well.
If the takeover, estimated at over 2 trillion won, goes ahead, the South Korean shipbuilding industry is expected to be dominated by two major shipbuilders — Hyundai Heavy and Samsung Heavy.
South Korean shipbuilders, once a cornerstone of the country’s economic growth and job creation, had been reeling from mounting losses in the past few years, caused by an industrywide slump and a glut of vessels amid tough competition with Chinese rivals.
The government has been hoping that the local shipbuilding industry can be overhauled in a way that two major players could dominate the sector to better compete against Chinese rivals and tackle sectoral ups and downs.
Daewoo Shipbuilding ended a debt rescheduling program in August 2001 after being told to streamline operations in August 1999. Its parent Daewoo Group collapsed under heavy debt in the wake of the 1997 financial crisis.
In 2009, KDB put Daewoo Shipbuilding back on the block after scrapping a deal to sell a controlling stake in the shipyard to Hanwha Group.
So far, up to 10 trillion won has been spent to salvage Daewoo Shipbuilding.
The combination of the two shipbuilders would create an unrivaled player in the sector. As of last year, Hyundai Heavy had an order backlog totaling 11.14 million compensated gross tons (CGTs), the largest among others in the sector. The comparable figure for Daewoo Shipbuilding was 5.84 million CGTs.
Their combined order backlog accounts for 21.2 percent of the total around the globe.
Sea News, February 11