Hyundai, 2 Affiliates Go for Daewoo

hyundai heavy industries tuesday said it will make an independent bid together with its two affiliates for a controlling stake in daewoo shipbuilding &﹔ marine engineering (dsme)."with hyundai mipo ａnd hyundai samho, we will go after the dsme. we will stay on no matter what," its senior ｅxecutive vice president said during a news conference in seoul. "for the time being, we are not considering forming a consortium with outside contenders because our cash reserves amount to 8.5 trillion won," lee said."that amount is enough considering daewoo＇s current stock movements." the remarks come after sk energy said it is considering joining a consortium led by posco. industry experts say sk energy will join the posco﹣led consortium ａnd plans to invest less than 100 billion won or about $90 million, a token amount for the size of daewoo shipbuilding.
hyundai heavy submitted a letter of intent to bid for dsme a week ago. other bidders include posco, hanwha ａnd gs group.
sources say daewoo shipbuilding may go up to 10 trillion won in its total price with the four companies courting it. if one pursues a 30 percent stake together with an additional 20 percent stake of friendly forces, the actual amount a winning bidder has to pay would go down to about 3 trillion won.
the government plans to sell its 50.4％ stake in daewoo shipbuilding by the end of this year.
although hyundai heavy was claiming it was sure to win the "bidding war" with cash in abundance, worries were afoot that hyundai＇s move might hurt its financial soundness in the long﹣term as the shipbuilding industry is subject to cyclical ups ａnd downs, analysts say.
"it is no reason to form a consortium with financial investors who want us to guarantee sizable profit in return for the participation. hyundai heavy should gain the management control in daewoo ａnd that＇s why the national pension service is against our interests," lee said.
the bidders for daewoo are busy forming consortiums as the stake is too large for a single company to hａndle.
the national pension service, which manages funds worth $230 billion, is pursuing joint investment opportunities in turnaround companies such as daewoo to improve on the stalled 6.1 percent average yield by making more high﹣risk investments.
hyundai＇s lee declined to unveil its detailed strategies to tackle possible downturn risks in the global shipping industry.
experts are even more pessimistic by saying that the heyday of the shipbuilding industry across the world is fading ａnd the downturn will come ｆrom early next year.
"severe international competition, supply﹣demａnd contradiction, the updating of shipbuilding stａndards on the international market, the high﹣cost of labor ａnd macro﹣economic policies such as the rise of interest rates are posing a threat to the global shipping industry," the economic research center of china shipbuilding industry corporation wrote in its research note.
"the global shipbuilding market will undergo a steady correction over the next few years," it said.
separately, hyundai heavy said it will not conduct huge layoffs among daewoo workers, even if it acquired daewoo.
hyundai＇s lee said the rumor is "totally groundless" by saying chung mong﹣joon is not in a position to harm the deal.
chung, 56, a former presidential aspirant for a liberal party, is the largest shareholder in hyundai heavy industries. he switched support to the now ruling grａnd national party in december 2007.