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THE INVESTOR
November 19, 2019
Big Reunion

Industrials

Samsung Heavy Industries mulls DSME takeover

  • PUBLISHED :February 08, 2019 - 16:12
  • UPDATED :February 10, 2019 - 13:54
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Samsung Heavy Industries is mulling taking over troubled Daewoo Shipbuilding & Marine Engineering, the company said on Feb. 8.

“The management is considering the idea after receiving an investment proposal from the Korea Development Bank,” said a company official. “But it’s too early to tell if there is any progress.”

The state-run KDI sent a proposal to Samsung Heavy Industries as part of a stalking-horse bid, in which the first chosen bidder sets the low-end bidding bar. 




If Samsung’s conditions beat those presented by Hyundai Heavy Industries, the memorandum of understanding it signed with the KDB becomes nullified.

On Jan. 31, the KDB, which holds a controlling 55.7 stake in DSME, inked a conditional deal worth an estimated 2.1 trillion won (US$1.87 billion) with HHI.

Market watchers, however, say the possibility of Samsung’s acquisition is low.

“I don’t think Samsung Heavy would be interested in DSME, considering Samsung Group’s weak commitment to the shipbuilding industry,” said Um Kyung-a, an analyst with Shinyoung Securities.

“Samsung Group has been focusing on the IT sector and has consequently been selling non-IT businesses since 2014,” Shinhan Securities analyst Eo-yeon said. “Also, for KDI, it’s better to raise valuation when there is just one big partner, and not two big ones.”

HHI is the world’s largest shipbuilding company in terms of production capacity and orders as of December 2018. DSME is a close No. 2, while Samsung Heavy Industries ranked fifth worldwide. HHI’s acquisition of DSME is set to shift Korea’s big three in the shipping industry to a big two.

The short time frame and relatively strong labor union presence at DSME would weigh down Samsung’s consideration, other market watchers said. Samsung is known for its anti-labor union policy. Only nine affiliates of Samsung Group have labor unions, including Samsung Electronics’ first-ever labor union formed last year.

Unlike HHI, which considered the deal for more than three months, Samsung has been given less than a month until its deadline to reply on Feb. 28.

By Park Ga-young (gypark@heraldcorp.com)

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