Hanwha Group moves to acquire shipbuilder DSME

The KSS-III submarine is the Republic of Korea Navy’s next-generation underwater combatant and is equipped with a six-shot vertical launch system for land attack. (DSME)

South Korea’s Hanwha Group announced on 26 September that it has entered into a preliminary agreement with Daewoo Shipbuilding & Marine Engineering (DSME), one of the country’s largest commercial and naval shipbuilders, to acquire a 49.3% stake and management rights for two trillion won (US$1.4 billion).

Per the conditional memorandum of understanding (MoU) signed between the two companies, six subsidiaries of the Hanwha Group – including its Hanwha Aerospace defence unit – have been designated as the preferred bidders. However, this will only be legally binding if Hanwha holds its lead against further competitive bids until 17 October.

The shares will largely be acquired from DSME’s main creditor, the government-owned Korea Development Bank (KDB), whose shareholding in the shipbuilder will reduce to about 28.2% from its current controlling stake of 55.7%. Hanwha stated that a formal acquisition agreement is expected to be announced in November and expects the transaction to be completed by the first half of 2023.

Although financially troubled for years, DSME has successfully built large surface combat vessels and advanced diesel electric submarines for the Republic of Korea Navy (RoKN) alongside its rival Hyundai Heavy Industries (HHI). The company has also won naval export deals in Indonesia, Thailand, Philippines, and the United Kingdom.

HHI’s earlier attempt to acquire DSME from KDB in a comparatively priced merger deal fell through in January after the European Commission blocked the deal, citing competition issues in the liquified natural gas (LNG) carrier market.

Hanwha also attempted to acquire DSME through a US$4.6 billion deal in 2008. The offer was then accepted by KDB but the transaction was terminated after the two parties failed to agree on payment terms.

Should the latest takeover bid be successful, Hanwha Group will be able leverage on its new naval shipbuilding capabilities along with its existing portfolio of defence products, such as ship combat management systems, to offer turnkey naval solutions to the RoKN and international customers.

by Jr Ng