Hyundai Heavy still rules the waves

Source: Xinhua | 2019-02-01

Hyundai Heavy Industries, the world’s biggest shipbuilding group, has announced a share swap deal worth 2.1 trillion won (US$1.89 billion) to take over second-ranked Daewoo and create a global heavyweight controlling over 20 percent of the market.

The move comes as the worldwide shipbuilding sector recovers from a global economic downturn that led to massive losses, widespread job cuts and, in 2017, the US$2.6 billion bailout of South Korea’s Daewoo Shipbuilding & Marine Engineering Co. State-funded Korea Development Bank owns 55.7 percent of Daewoo, and has said it intends to sell the stake and consolidate the country’s three biggest shipbuilders — which includes Samsung Heavy Industries Co — into two.

The combination of two of the giant shipbuilders would ease competition and excess capacity, which have depressed ship prices, KDB Chairman Lee Dong-gull said.

The deal will “raise the fundamental competitiveness of Daewoo, at a time when the threat from latecomers in China and Singapore is growing,” Lee said.

Hyundai and Daewoo hold a combined market share of 21.2 percent, followed by Japan’s Imabari Shipbuilding with a 6.6 percent, showed data from Clarksons Research.

Lee said it will take several months to gain approval from antitrust regulators from related countries.

He said the size of the resulting entity’s market share would not be detrimental to the interests of customers.

Daewoo will also receive liquidity support of 2.5 trillion won from KDB and Hyundai, Hyundai said.

KDB also said it would approach Samsung Heavy to gauge any interest in taking over Daewoo.

A Samsung Heavy spokesman said the company has received a proposal from KDB and it is reviewing the matter.

“Consolidation is good for the industry, but not for the company which buys the stake,” said analyst Um Kyung-a at Shinyoung Securities, citing overlapping businesses between Hyundai and Daewoo.