Posco Says Buffett Wants Study of Daewoo Ship Offer

Posco, Asia’s most profitable steelmaker, said shareholders including Warren Buffett want the mill to undertake a “thorough” study of the effects of a bid for a shipbuilder because of concern over the industry’s outlook. Buffett’s Berkshire Hathaway Inc. and other foreign and domestic investors “have expressed concerns that the shipbuilding industry may go through a prolonged downturn,” Choi Doo Jin, a Posco spokesman, said by phone today, commenting on a report in the Korea Economic Daily. Daewoo Shipbuilding & Marine Engineering Co. shares fell by the most in almost four months on the report, which said overseas shareholders oppose a bid for the shipyard.
Posco’s Chief Executive Officer Chung Joon Yang is spearheading a $30 billion expansion that includes plans to build plants in India and Indonesia as demand recovers after the global recession. Chung said in January Posco will consider bidding for Daewoo Shipbuilding, the world’s third-biggest shipbuilder.
“This is a blow to Daewoo Shipbuilding shares today because it could mean that the sale will fail again,” said Cho In Karp, head of research at Heungkuk Securities Co. in Seoul. “Posco is the only company that has the cash on hand to buy a company of this size.”
Posco shares rose as much as 1.9 percent and were 0.4 percent higher at 533,000 won at 1:45 p.m. in Seoul. Daewoo Shipbuilding fell as much as 8.2 percent, the biggest intraday decline since Nov. 27, and was down 4.1 percent at 21,100 won, valuing the company at about $3.5 billion.
Reviewing Synergies
Berkshire Hathaway and other overseas investors told Posco they won’t support the steelmaker’s bid for the shipbuilder, the Korea Economic Daily reported earlier today.
Buffett didn’t respond to a request for comment left with an assistant at his Omaha, Nebraska office. Berkshire holds a 4.5 percent stake in Pohang, South Korea-based Posco, according to data compiled by Bloomberg. Overseas investors own 49 percent of the Korean mill, according to Bloomberg data.
“We will thoroughly review possible synergies once the shipbuilder is put up for sale,” Choi said.
State-owned Korea Development Bank and Korea Asset Management Corp. scrapped plans to sell their 50 percent stake in Daewoo Shipbuilding last year in the hope of attracting a higher price.
Investors didn’t express concerns over or oppose Posco’s bid to buy a controlling stake in Daewoo International Corp., a South Korean trading company that’s leading a natural gas project in Myanmar, Posco’s Choi said.
Posco, Lotte Group and Jihan Global Consortium can conduct due diligence until mid-April before making final bids, Korea Asset Management Corp., the biggest shareholder of Daewoo International, said March 19.