South Korean shipbuilding giant Hyundai Heavy Industries (HHI) is to sign a formal deal to acquire compatriot rival Daewoo Shipbuilding & Marine Engineering (DSME), local media cited Korea Development Bank (KDB) as saying.
HHI and KDB will enter into the final contract in early March, following a conditional agreement signed in January 2019.
The announcement comes as Samsung Heavy Industries (SHI), another major shipbuilder in South Korea, expressed its intention not to bid for the DSME stake.
The state-controlled KDB holds a 55.7 percent stake in DSME, with an estimated worth of KRW 2.16 trillion (USD 1.94 billion).
Under the agreement, KDB will transfer its DSME stocks to HHI and buy KRW 1.5 trillion worth of HHI stocks that will be issued later. What is more, the bank is to consider providing KRW 1 trillion in financial help to DSME.
As a result, HHI will be split into two entities of which one will be listed on the market. The shipbuilder will also be selling its stocks to the bank.
If proceeded, the agreement will see HHI owning a 26 percent stake in DSME and KDB 18 percent.
However, the acquisition could face obstacles as labor unions at both HHI and DSME yards opposed the deal. Workers are reportedly worried that the acquisition could result in massive layoffs.
The completion of the deal, expected in five to six months, will be subject to regulatory approval as it has the potential to reshape the global shipbuilding market.
World Maritime News Staff