HHI signs deal for DSME takeover

Sarah Carter
Sarah Carter

11 March 2019

South Korea’s trio of major shipbuilders will become two after Hyundai Heavy Industries (HHI) signed a deal with the Korea Development Bank (KDB) as the major stakeholder in Daewoo Shipbuilding & Marine Engineering (DSME) to acquire effective control of the smaller builder last week.

The future of DSME had been in the balance since January when KDB announced it was looking to offload its some or all of its 100% ownership. South Korea’s other major builder – Samsung – was offered the chance to participate but declined.

Under the deal inked on 8 March, HHI will establish an intermediate holding company that will control its shipbuilding units, including the newly acquired DSME. KDB will secure an 18% stake in the new company by contributing its 100% stake in DSME, which is worth $1.86 billion. KDB will receive $1.11 billion worth of redeemable convertible preference shares (RCPS) and $752.55 million worth of ordinary shares of the envisioned intermediate holding company. HHI Holdings will become the largest shareholder with a 28% and the KDB the second largest shareholder with an 18% stake.

Although the merger of HHI and DSME will increase HHI’s share of world shipbuilding to something like 23%, it is the combined companies share of the lucrative LNG market that will cause most concern. Currently HHI and DSME are building two of every three LNG carriers on order.