Fresh bidding expected for Daewoo Shipbuilding

Korea Development Bank has rejected Hanwha Group's 6.3 trillion won (S$6.93 billion) offer for Daewoo Shipbuilding & Marine Engineering Co and says it plans to re- invite bids for what could be the industry's biggest acquisition. Hanwha's fundraising plan for a 50.4 per cent stake in the world's third- largest shipbuilder was insufficient, Chung In Sung, senior executive director at Korea Development Bank, said yesterday at a media briefing here. The bank will try to resell the shares depending on market conditions, he said.
Hanwha, with one trillion won in cash, struggled to arrange funds after the global financial crisis eroded the value of the Daewoo Shipbuilding stake and made banks reluctant to lend. Failure of the sale may disrupt the South Korean government's efforts to sell stakes in companies including Hynix Semiconductor Inc and Hyundai Engineering & Construction Co.
'It could take Korea Development Bank some time to resell the shares given the value of the stake has fallen and the financial market conditions still look uncertain,' said Lee Jae Won, an analyst at Tong Yang Securities Inc in Seoul.
Hanwha Chemical Corp, which led the group's bid, gained 4.4 per cent to close at 7,770 won yesterday. Hanwha Corp rose 11 per cent to 28,550 won. Daewoo Shipbuilding fell 4.4 per cent to 19,350 won.
'The reason this deal collapsed is because of funding difficulties and Hanwha's will to take over Daewoo Shipbuilding weakened,' Mr Chung said. 'If Hanwha took over the shipyard, it would have put a lot of financial burden on both companies.'
The group sought to renegotiate terms agreed last November with Korea Development Bank and offered to pay in instalments, which was unacceptable, Mr Chung said.
Korea Development Bank won't return the more than 300 billion won Hanwha paid in deposit for the acquisition, Mr Chung said. Hanwha will seek to get the money back and will focus on overcoming the current financial crisis, it said yesterday in a statement.
The stake being sold by Korea Development Bank and Korea Asset Management Corp is worth 1.87 trillion won based on yesterday's closing price. They became shareholders of Daewoo Shipbuilding after swapping debt for equity in December 2000, rescuing the company from near collapse.
Korea Development Bank will look at all options to find a way to make Daewoo Shipbuilding attractive to sell later, Mr Chung said.
Hanwha, with interests from explosives to shopping malls, won the bid for Daewoo Shipbuilding last Oct 24 as part of a plan to extend its construction and energy businesses to oil tankers and deep-see drilling structures. It beat Hyundai Heavy Industries Co, the world's biggest shipbuilder, in the auction.
Posco, South Korea's largest supplier of steel to shipbuilders, isn't interested in Daewoo Shipbuilding should the stake be reoffered, Posco chairman Lee Ku Taek said on Jan 15. Posco was eliminated in the earlier bidding.