Whaf If Buffett Were Asked About POSCO’s Bid?
By Jane Han
Staff Reporter
POSCO's bid for the world's third-largest shipbuilder Daewoo Shipbuilding & Marine Engineering (DSME) is sailing along despite some investors' skepticism over the steel maker's off-track business strategy.
But POSCO is downplaying concerns, saying that investors unhappy with its move will end up selling off their shares before the big takeover. So then, the question comes is: Will Warren Buffett be one of them?
The legendary American investor, who owns a 4-percent stake in the world's fourth-largest steel maker, was upbeat about POSCO up till May of this year, which was the last time he mentioned the company publicly.
Buffett even said that he would buy more of the steel group, if the price was attractive.
But now that POSCO is about to take on a much bolder strategy that could cost anywhere between $7 billion to $8 billion, will the investment guru still want in?
Kwak Joong-bo, an analyst at Hana Daetoo, who has been closely falling Buffett's strategy, says it is most likely that the money whiz would keep his stake, considering his decisions are typically based on long-term results.
``DSME is going to cost POSCO now, but the synergy effect it will bring will please Buffett,'' says Kwak. By bidding for DSME, the steel giant is aiming to secure a major customer of its steel plate products.
Although this is considered a cunning move, investors have raised concerns that the steel maker's exploration into a new and unfamiliar business area ― away from its core steel sector ― is risky.
These factors could be problematic for some stakeholders, but not Buffett, says Kim Joong-keun, a self-claimed Buffett expert, who currently heads a private hedge fund firm.
``For him, the cost of DSME will be the biggest problem,'' says Kim. ``He won't be happy that POSCO is spending so much on the shipbuilder.''
Kim said that America's richest man grew his wealth mainly by buying things at a bargain price. DSME probably won't sound cheap to Buffett, he added, explaining that the four bidders ― POSCO, GS Holdings and Hanwha Group and Hyundai Heavy Industries ― will write up an excessively high amount for DSME, more than what it may be worth.
Another local analyst, who asked not to be named, agreed, saying, Buffett may not care so much about POSCO digressing from its core path, but he would mind the amount of money its planning to pour in at a time when global economy is sinking.