POSCO to Forge Alliance With Hyundai Heavy
By Park Hyong-ki
Staff Reporter
POSCO is looking to forge a strategic alliance with Hyundai Heavy Industries in an effort to strengthen its defense against foreign hostile takeover attempts.
``Hyundai Mipo Dockyard, a flagship of Hyundai Heavy, will purchase a 1-percent treasure stock in POSCO,'' said the steel maker after its board meeting on Thursday.
``In return, POSCO will buy around a 2-percent stake in Hyundai Heavy Industries held by Hyundai Mipo, which is similar in value to POSCO's 1 percent.''
This is part of a ``win-win'' strategy developed between Korea's steel and shipbuilding giants, which could lead to a stable supply and demand of steel plates for ships for both sides.
As Korea retains its dominance in shipbuilding, demand for ship steel has been growing with Japan and China fulfilling much of Korean shipbuilders' steel needs.
This year, Hyundai Heavy's estimated demand for such products is at around 3.2 million metric tons, including 700,000 tons from China and 800,000 tons from Japan.
The deal could also help shield POSCO from possible merger and acquisition (M&A) attempts, which has been a top priority for the world's fourth largest steel maker after Mittal Steel took over Arcelor SA last year.
The mega-merger between the Nos. 1 and 2 prompted the company to step up efforts to boost its market capitalization, stock value and friendly shareholders, as foreign investors hold about 60 percent of POSCO shares.
To this end, the company has forged strategic ties with a number of companies, including Nippon Steel, the world's No. 2 steel maker, and SeAH Steel, Korea's leading steel pipe and tube producer, in research and development, technology and cross-shareholdings.
Amid consolidations in the global steel industry, to survive in the cutthroat competition POSCO CEO Lee Ku-taek said he will not stand idly by, but take active measures and seek M&A opportunities to increase its worldwide presence.
In addition to raising the output of its strategic products _ stainless, automotive, electronic and ship steels, POSCO is aiming to produce 50 million metric tons by 2010 by building an integrated steel mill in India, expanding its production in China and upgrading its plants in Pohang, North Kyongsang Province, and Kwangyang, South Cholla Province.
Meanwhile, Dongkuk Steel, which has strategic ties with the world's No. 3 steel maker JFE of Japan, said it plans to swap its 9.8 percent stake in Union Steel with POSCO's 9.8 percent stake in Pohang Coated Steel (POCOS). The deal also requires both steel producers to forge an alliance in the business of cold-rolled steel.