By Na Jeong-ju
Staff Reporter
Korea Development Bank (KDB), the largest shareholder of Daewoo Shipbuilding & Marine Engineering, has nullified its decision to choose Goldman Sachs as the lead manager for the sale of the shipbuilder amid rumors that military intelligence officials will intervene in the sale in view of its consequences for national security.
Daewoo has supplied submarines, destroyers and other types of vessels to Korea's Navy since 1989. KDB put the firm up for sale and announced last month that it had selected Goldman Sachs as the lead manager.
Defense officials have voiced concerns about possible military technology leakage, citing Goldman's recent investment in a Chinese shipbuilder. GS Phereclus Holdings, a wholly owned unit of Goldman Sachs, has agreed to pay $50 million in cash for a 20 percent stake in Yangfan Group, a mid-sized shipbuilder based in Zhejiang Province, after year-long negotiations.
``The sale of Daewoo can be potentially damaging to national defense as it has manufactured and developed military ships for South Korea,'' a defense industry source said on condition of anonymity. ``The Defense Security Command has asked KDB to allow its officials to check Daewoo's defense technology and put national security on top priority during upcoming negotiations for the sale of the shipbuilder.''
In a statement released Sunday, KDB said it has cancelled a contract with Goldman Sachs and will name a new lead manager to complete the sale of Daewoo as quickly as possible. KDB couldn't reach an agreement with the firm over some contract terms, the bank said, without giving further details.
The bank denied the involvement of the military in the sale of Daewoo.
KDB has stepped up efforts to find a new owner of the world's third-largest shipbuilder in a deal that may cost up to 8 trillion won ($8.12 billion). Potential bidders include POSCO, Hyundai Heavy Industries, Doosan Heavy Industries & Construction, GS Group and STX Group. Some Chinese shipbuilders have also shown interest in Daewoo.
Some critics raised questions that KDB, a state-owned bank, sought a deal with Goldman Sachs for its interests. Lee Ji-hyung, a nephew of President Lee Myung-bak and the oldest son of National Assembly Vice Speaker Lee Sang-deuk, is the head of Goldman Sachs Asset Management, a South Korean arm of the global company.
A Goldman Sachs spokesman in Seoul, asking not to be named, brushed off the allegation as groundless.