20 Years of Negotiations and Setbacks in the Sale History of Daewoo Shipbuilding & Marine Engineering

Selected as Hanwha Group's preferred partner in 2008, gave up due to global financial crisis
Final 'big deal' attempt also failed due to EU competition authority disapproval

▲Daewoo Shipbuilding & Marine Engineering Geoje Okpo Shipyard Overview

[Asia Economy Reporter Yoo Je-hoon] The history of Daewoo Shipbuilding & Marine Engineering's (DSME) attempted sales over the past 20 years can be summarized as a "series of misfortunes." Each time a sale was attempted, it was blocked by the parent company's crisis, the collapse of the shipbuilding industry due to the global financial crisis, opposition from the European Union (EU), and other factors, repeatedly returning the situation to "square one."

Daewoo Shipbuilding Put Up for Sale Amid Daewoo Group's Disintegration... Repeated Failures

Starting as Daehan Shipbuilding Corporation's Okpo Shipyard in 1973 and renamed Daewoo Shipbuilding in 1978, DSME first became a sale target right after the foreign exchange crisis. At that time, Daewoo Group and the late Chairman Kim Woo-joong attempted to sell Daewoo Heavy Industries' shipbuilding division to a Japanese company to overcome the crisis, but the group itself disintegrated, and the attempt ended in failure.

Attempts to sell continued even after the foreign exchange crisis. In 2001, when DSME graduated early from workout after two years, the Korea Development Bank (KDB) tried to sell DSME. Negotiations were underway with Australia's Newcastle Shipbuilding, but KDB decided to increase the company's value and pursue a higher sale price, causing this attempt to also fail.

Successful 2008 Sale Attempt... Direct Hit by Global Financial Crisis

The sale was actively pursued in 2008. At that time, when the shipbuilding industry was doing well, major companies such as Hanwha Group, POSCO Group, GS Group, Doosan Group, and Hyundai Heavy Industries Group showed interest in acquiring DSME, making the bidding competitive. As many major companies participated, the acquisition process was intense. Doosan Group gave up early, and GS Group initially planned a joint acquisition with POSCO but later withdrew, leading to alliances and rivalries. The bidding heated up, and the initial acquisition price of 4 to 5 trillion won surged to 8 to 9 trillion won.

Hanwha Group was selected as the preferred bidder, but the rosy future did not last long. The global financial crisis broke out in 2008. When the memorandum of understanding (MOU) was signed, Hanwha assured funding of over 6 trillion won, but due to the financial crisis, funding became difficult. Hanwha requested to pay the acquisition price in installments, causing conflicts with KDB. When KDB rejected this, Hanwha proposed to first purchase 60% of KDB's shares and buy the remaining shares five years later, but this was also rejected, leading Hanwha to give up the acquisition in January of the following year.

KDB and Hanwha Group had to engage in legal battles due to the failed deal. After being selected as the preferred bidder, Hanwha paid a performance bond of about 315 billion won, approximately 5% of the acquisition price. After the deal fell through, a dispute over this money ensued. The lawsuit was finally settled in 2016 with a partial victory for Hanwha Group.

Final 'Big Deal' Attempt Also Sunk by European Opposition

DSME continued to be a "painful asset" for KDB. Around 2015-2016, the global shipbuilding industry plunged into an unprecedented crisis. Amid this, DSME was engulfed in a total crisis in 2016 when accounting fraud involving about 5 trillion won was uncovered. Although creditors provided an additional 2.9 trillion won in funding the following year, the fundamental crisis remained unchanged.

In 2019, former KDB Chairman Lee Dong-geol pulled out the "big deal" card of integration with Hyundai Heavy Industries Group. The plan was to restructure the shipbuilding industry by transforming the big three system of Hyundai Heavy Industries, DSME, and Samsung Heavy Industries into a big two system of Hyundai Heavy Industries-DSME and Samsung Heavy Industries.

However, the final big deal attempt also failed. The EU competition authorities, where many shipping companies are concentrated, disapproved the merger of the world's first and second largest shipbuilders. At a press conference, former Chairman Lee expressed regret, saying, "The EU's disapproval decision is due to national self-interest and is very regrettable," and added, "Finding a new owner is a prerequisite for the fundamental normalization of DSME."

This content was produced with the assistance of AI translation services.