SEOUL - Hyundai Heavy Industries Group looks set to be the sole bidder for South Korea's Daewoo Shipbuilding & Marine Engineering, after Samsung Heavy Industries rejected an invitation to bid from the shipyard's top shareholder, Korea Development Bank.
KDB, which holds 55.7% of DSME, said that Samsung Heavy had notified the state-run lender that it had no intention of joining the bidding process.
The announcement comes two weeks after HHIG announced it had reached a tentative deal to acquire a controlling stake in rival DSME through a 2.1 trillion won ($1.98 billion) stock swap deal. Under the deal, HHIG will set up a joint shipbuilding venture with KDB. The bank has agreed to transfer its entire stake in Daewoo to the joint venture in exchange for 7% stake in the new company, with preferred shares worth 1.25 trillion won.
"Hyundai Heavy Industries was confirmed as the preferred bidder. We will sign a deal with Hyundai Heavy Industries after getting approval from the boardroom in early March," said KDB in a statement. "Later we will close the deal by transferring our stake in DSME to the joint venture."
HHIG will have a 28% stake in the venture. Both Hyundai Heavy Industries -- HHIG's shipbuilding affiliate -- and Daewoo Shipbuilding will be under the joint venture.
Along with Samsung Heavy Industries, HHIG and Daewoo make up South Korea's three biggest shipbuilders. The industry has faced strong headwinds in recent years, and HHIG said that acquiring its rival could help it bounce back from recent losses.
The deal, if it goes through, would also privatize Daewoo 20 years after the government first injected funds into the company in the aftermath of the Asian financial crisis. The government later poured about 10 trillion won to keep the debt-ridden company afloat.
Daewoo was once one of South Korea's largest conglomerates, with businesses ranging from shipbuilding to electronics to automobiles, but it collapsed under the weight of heavy debt and unchecked expansion.
HHIG said the deal will bring together top-tier technology and expertise from both companies. Hyundai is the global leader in liquefied natural gas-fueled ships, while Daewoo specializes in container ships and warships.
HHIG revealed poor quarterly earnings in the fourth quarter, posting a 156.7 billion won operating loss, a reversal from its 111.5 billion won operating profit a year earlier.
Protests from trade unions are another hurdle to the deal. Union representatives from both Daewoo Shipbuilding and Hyundai Heavy have called on KDB to abandon the plan if it entails layoffs.