Hanwhas Daewoo Bid Collapses
By Yoon Ja-young
Staff Reporter
The deal handing over Daewoo Shipbuilding & Marine Engineering (DSME) to Hanwha is expected to fall apart, with the news causing the latter's share price to skyrocket Friday.
Korea Development Bank (KDB), the main creditor of DSME, said it would announce its position about the sale of the shipbuilder next week.
``Hanwha sent their final proposal regarding the acquisition, so the board of directors and the joint committee will reach a conclusion next week,'' KDB said.
Hanwha was selected as the preferred bidder for the world's third largest shipbuilder in last October, and is scheduled to purchase a 50.4 percent stake.
Due to the financial market crunch, however, the company struggled to fund the plan and concerns emerged that the acquisition could be a deadweight for the group.
The two parties were originally scheduled to sign a deal by the end of the last year, but the deadline was extended to this month at the request of Hanwha. KDB even proposed setting up a private equity fund (PEF) to buy assets of the conglomerate so that it could fund the acquisition.
However, Hanwha recently proposed purchasing only 60 percent of the KDB-owned stake before acquiring the remaining 40 percent at a time when it gets additional funding from investors.
The proposal isn't likely to be accepted by KDB. It has said that allowing partial acquisition would be like giving a special favor to Hanwha, which the bank says is contrary to the memorandum of understanding (MOU).
If the deal breaks down next week, the two parties are expected to head to the court over the 300 billion won deposit money Hanwha gave to acquire the shipbuilder. The chaebol expects to get back part of the money, as due diligence on the shipbuilder hasn't started yet in the face of the trade union's opposition.
Hanwha shares soared 13.32 percent, to close at 26.800 won Friday, on expectations that its corporate value would increase following the rupture of the deal. In other words, investors regard the deal as negatively affecting Hanwha's future cash flow.
``The possibility of Hanwha acquiring DSME has become dim, as KDB seems not to accept the proposal to acquire the shipbuilder in stages,'' said Lee Jeong-heon, an analyst at Hana Daetoo Securities.
He said giving up the 300 billion won in deposits for the deal would be better for Hanwha's corporate value than injecting over six trillion won to take over the shipbuilder.