Hyundai Heavy Inks Formal Contract to Take Over DSME

Image Courtesy: Wikimedia/Wei-Te Wong under CC BY-SA 2.0 license

South Korea’s shipbuilding group Hyundai Heavy Industries (HHI) has signed a formal deal to proceed with the acquisition of its smaller rival Daewoo Shipbuilding & Marine Engineering (DSME).

The deal was inked with Korean state lender Korea Development Bank (KDB) on March 8 and follows a conditional agreement the two parties reached in January 2019.

The duo agreed that KDB, which holds a 55.7 percent stake in DSME with an estimated worth of KRW 2.16 trillion (USD 1.94 billion), will sell its stake.

KDB will transfer its DSME common stock to HHI and buy KRW 1.5 trillion worth of HHI stocks, Hyundai Heavy confirmed today in a stock exhange filing.

What is more, the bank will consider providing KRW 1 trillion in financial help to DSME.

HHI will establish a holding company that will control the group’s shipyards, including DSME.

The transaction will see HHI owning a 26 percent stake in DSME and KDB 18 percent.

As explained by Hyundai Heavy, the main prerequisite for the realization of this kind of investment is the receipt of all government licenses and permits as well as the approval of business combination by domestic and foreign regulatory authorities.

The final contract comes as another South Korean shipyard, Samsung Heavy Industries (SHI) said it was not interested in buying a majority stake in DSME.

The merger has raised fears of potential layoffs at both HHI and DSME yards. In February, more than 90 percent of workers at DSME vowed to go on strike over the takeover.