Bid Advantage Puts Hanwha in Lurch
By Jane Han
Staff Reporter
Bidders for Daewoo Shipbuilding & Marine Engineering (DSME) have put the world's No. 3 shipyard on a pedestal for being their pivotal growth engine, but it's obvious that the market has an opposite take on the prized item.
One day after POSCO got booted out from the fierce race for DSME, its shares bounced back, climbing 0.17 percent to close at 302,000 won Friday. POSCO stocks gained as much as 6 percent at one point in the earlier session, while the wider market sank 2.73 percent.
This is a pretty impressive comeback, considering the steel maker's fall to its daily limit of 14.95 percent just one day earlier.
The story was different, however, for Hanwha, the insurance and financial conglomerate that instantly rose late Thursday as the most viable candidate to snap up Daewoo. Its shares tanked almost 15 percent, ending at its 52-week-low of 25,950 won.
Analysts say that Hanwha's steep loss was led by market uncertainties over a possible liquidity crunch in taking up the giant shipyard, which is estimated to fetch over 5 trillion won.
``Hanwha shares took a hit once word spread that it wrote a higher price for DSME than competitor Hyundai Heavy Industries (HHI),'' said Kim Jae-joong, an analyst at Woori Investment & Securities. Hanwha and HHI are now the only two remaining competitors.
Industry sources say that the Hanwha offered around 6 trillion won in its write-in bid submitted to the Korea Development Bank, the sale arranger, on Monday.
Kim Kang-oh, an analyst at Prudential Investment & Securities, said POSCO's fallout will help drive its shares up because it sends investors a message that the steel maker will go back to focusing on its core business.
Grim outlook for the steel industry, plus the high price tag on DSME bogged down POSCO's shares, but the company could now channel its cash into other overseas projects in India and Vietnam, he says.
The world's fourth-largest steel group's stock price has more than halved over the past year.
Analysts say the dropout is a short-term positive for POSCO, but it may be a long-term negative for the industrial giant seeking sustained growth.
``POSCO has been consistently stressing the necessity of DSME acquisition, so this means the company has lost a key engine,'' says one analyst at Eugene Investment & Securities, adding that the minus factor would be reflected in the stock value.