Posco Needs to Buy Daewoo Ship for Growth, Has Cash

posco, asia＇s third﹣largest steelmaker, ``needs＇＇ to buy daewoo shipbuilding &﹔ marine engineering co. for its growth ａnd will today submit a bid to compete with hyundai heavy industries co. ``we will do our best step by step to take over daewoo shipbuilding because we need daewoo for future growth,＇＇ posco spokesman choi doo jin said in an interview late yesterday. ``we also have sufficient cash for the bid.＇＇ posco would benefit ｆrom the record order backlogs shipyards have, while a winning bid ｆrom hyundai heavy, the world＇s largest shipyard, would expａnd its size to three times the next biggest rival. an auction may drive up the price of the 50.4 percent stake in daewoo to as much as 7 trillion won ($6.5 billion), double the shares value.
``competition for daewoo shipbuilding will likely become very intense now that hyundai heavy is getting into the race,＇＇ cho in karp, analyst at good morning shinhan securities co., said in seoul. ``that will most likely drive up the selling price.＇＇
hyundai heavy fell 3.7 percent to 235,000 won, the lowest level since may 2 last year, as of 12:03 p.m. in seoul today. the benchmark kospi index was little changed. posco rose 2.1 percent, the most in almost two weeks, to 471,500 won.
state﹣owned korea development bank ａnd korea asset management corp. are selling their stake in seoul﹣based daewoo shipbuilding, ａnd preliminary bids must be submitted by 3 p.m. local time today. they will pick a preferred bidder in october after a final bid is received next month.
bargaining power
ulsan﹣based hyundai heavy yesterday said it will bid for daewoo shipbuilding, the third﹣largest. combining the two companies may strengthen the shipyards＇ ability to bargain with pohang﹣based posco, the biggest supplier of ship plates in korea.
the stake may be worth as much as 7 trillion won, cho ａnd other analysts said. it was valued at 3.35 trillion won based on yesterday＇s closing price.
posco had 6.1 trillion won in cash ａnd cash﹣equivalent at the end of june, ａnd hyundai heavy had 8.8 trillion won, according to their first﹣half earning statements.
an acquisition of daewoo shipbuilding will enable the buyer to also benefit ｆrom growing demａnd for offshore drilling rigs. soaring oil prices ａnd depleting reserves are encouraging companies to boost investments in exploration ａnd production.
state﹣linked national pension service, south korea＇s largest investor, said aug. 19 it may spend as much as 1.5 trillion won to make a joint bid for daewoo. the fund has been in talks with companies that have shown interest, including posco.