Hanwha's Daewoo shipyard deal falls apart

The 6.3 trillion won deal to sell a controlling stake in Daewoo Shipbuilding & Marine Engineering Co. to Hanwha Group collapsed yesterday on differences over payment terms. Korea Development Bank decided to scrap the planned sale, after Hanwha insisted on easing of the initial payment schedule, officials said. "We came to the judgement that negotiations with Hanwha would be difficult to continue," an KDB official said. "Hanwha's 300 billion won ($220 million) deposit will be seized."
The decision was made by the state-run lender's board yesterday and the KDB will make an official announcement today, the official said. It is the largest shareholder of Daewoo Shipbuilding, the world's third-largest shipyard.
Hanwha Group said it was not officially notified by the seller of any decision. Sources at the conglomerate said the group has already started studying ways to recover at least a part of the deposit and a lawsuit is likely.
The collapse of the shipyard sale came as the world recession and financial crisis dampened the mood for mergers and acquisitions in Korea and elsewhere.
It also follows the failure of talks earlier this month between Woori Bank and U.S. private equity firm Ripplewood Holdings over a majority stake in Daewoo Electronics Corp.
The sale of steelmaker Ssangyong Engineering & Construction Co. to Dongkuk Steel Mill Co. also fell apart last month after Dongkuk failed to cut the purchase price.
Hanwha signed a preliminary deal with the KDB on Nov. 14 to buy a 50.4-percent stake in Daewoo Shipbuilding. Although the acquisition price was not disclosed, it was widely said to be 6.3 trillion won.
Hanwha had since sought to ease payment terms, as funding became costlier amid the global credit crisis.
The conglomerate has proposed to pay half of the acquisition price by the March 30 deadline, while insisting on flexibility on the payment of the remaining half. The original agreement stipulates completion of payment by the deadline.
The stake on offer, held by KDB and debt clearer Korea Asset Management Corp, is worth 2 trillion won in the market, or half of its value six months ago, hit by the global financial crisis and worries about a slowdown in shipbuilding orders.
Hanwha, Korea's ninth-largest family-owned conglomerate whose business interests range from explosives to resorts, was chosen on Oct. 24 as the preferred buyer for the shipyard, beating the world's largest shipbuilder Hyundai Heavy Industries Co. and steelmaker POSCO.