GS to Duel POSCO Over Daewoo

south korea＇s gs group ａnd steel giant posco are entering a new round of feuding in their bid to take over the government＇s stake in daewoo shipbuilding &﹔ marine engineering (dsme), after doosan group announced monday it was ｄropping out of the race to takeover the world＇s no. 3 shipyard to focus on its core businesses. "daewoo shipbuilding has many business units that have the potential to boost the future growth of our group as a new cash cow, ａnd we are fully ready to join, ａnd win, the bidding race," a gs spokesman said, tuesday.
"capital raising is the biggest issue in this race. gs has already secured stable strategic ａnd financial investors," the spokesman added.
he also did not rule out the possibility of joining hａnds with the national pension service (nps).
the fund has some 2.3 trillion won or $2.2 billion in assets under management.
according to gs officials, the group＇s relatively lower debt ratio, currently only 26 percent, is giving the group a competitive edge over its rival in the bidding race.
sources told the korea times that samsung heavy industries talked with gs group about setting up a possible consortium to bid for the shipbuilder.
gs is positive that given the market situation, gs engineering &﹔ construction holds a good position in the overseas plants sector, which will enhance dsme＇s competitiveness.
the group has been maintaining a solid partnership with chevron corporations, taking into acｃount that dsme’s major clients are leading international oil refineries.
the government﹣owned korea development bank (kdb) is set to proceed with an official bidding process friday to sell its stake in dsme.
"we will officially announce the dsme stake sale to bring potential bidders via advertisements possibly that day," a kdb official said.
the bank, the sole manager of the sale of the shipbuilder, will review collecting letters of intent ｆrom all potential bidders, he added.
the government plans to sell its 50.4 percent stake in daewoo shipbuilding by the end of the year. kdb holds 31.3 percent, while 19.1 percent is owned by korea asset management.
synergy for posco?
the virtual leader, posco, has repeatedly said the acquisition of the shipbuilder would produce synergy in overseas energy development, as the steel manufacturer is better positioned in raw materials.
with abundant internal cash reserves of at least 8 trillion won ａnd transparency in its management, some industry watchers say posco has the edge.
but criticism is running that posco’s move is against trends in the global steel industry.
"personally, posco＇s bid is not the right option as shipbuilding is another cyclical sector like semiconductors. i doubt foreign shareholders will give a green light for posco to spend internal reserves for daewoo," an industry source said.
since the government ａnd the kdb ended the sale of most posco shares in late 2000, nps owns 3.91 percent, ａnd foreign investors 45 percent.
"daewoo seems a good option for posco to expａnd its business portfolio. but the company could create what it says is synergy by concentrating on its traditional cash cow ― steel," the source added.
global steel makers are seeking ``vertical integration’’ rather than expａnding to unrelated sectors.
surging demａnd for steel products over the past five years has been a key catalyst ａnd world steel prices are controlled by a few groups ｆrom iron ore miners to steel producers, analysts say.
"if posco wants to buy dsme, they should form a consortium because they do not have any experience in ship building," hanwha said.